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 Home > About Thailand > Economy > Other Sources of Finance



Finance companies cannot take deposits, but they can raise funds by issuing promissory notes or similar instruments; these, in turn, are lent to businesses and individuals. Finance companies come into existence in 1969 and have grown rapidly, reaching a total of 91 as of December 1993. Of these, 20 companies are licensed to offer only finance services, 71 to provide both finance and securities services, and 13 to offer only securities services and 17 credit fonciers companies. Finance companies are not subject to the same interest rate restrictions as commercial banks on their promissory notes, but are subject to the same restrictions on lending rates.

Many finance companies also perform the functions of investment banks by underwriting and marketing the securities of private sector companies. While some of the larger, finance companies have been moving towards term lending ,the bulk of their assets are still concentrated on short-term consumer financing and cheque discounting services. With the passing of the Finance Business, Securities and Credit Fonciers Business Act of 1979 and its revision of 1983, all finance companies are to be authorized and regulated by the Ministry of Finance and the Bank of Thailand.

Agricultural cooperatives are organized by farmers for concerted efforts in agricultural activities including the provision of credit to members, while savings cooperatives are formed on an occupational basis with most of the members being salary earners. The agricultural cooperatives obtain most of their funds from the BAAC and lend them directly to member farmers. The savings cooperatives, on the other hand, obtain their loanable funds through a payroll withholding system. The loans given by the savings cooperatives are mostly for meeting current needs, or unexpected expenses or for financing the purchase of consumer goods.

There are at present 12 life insurance companies in Bangkok with branches throughout the country. Of the different types of life insurance, endownment is the most popular, accounting for about 80 percent of all policies sold. The Life Insurance Act (1958) requires each company to maintain security deposits of two million baht and capital funds of five million baht. It also specifies the various forms of investment into which life insurance companies may put their funds.

Credit fonciers finance the purchase of land or housing construction. They may not mobilize funds from the general public but must rely on their own resources or borrowings. There are at present 17 such companies, most of them operating in Bangkok.

The Government Savings Bank is the only wholly government-owned savings bank in the country. With 528 branches at the end of 1993, it has been very successful in mobilizing household savings and invests over 90 percent of its deposits in government bonds.

The Industrial Finance Corporation of Thailand (IFCT) was established in 1959. Functioning along the lines of a private development institution, it is the only industrial development bank in Thailand. Its sources of funds at present are borrowings from several institutions. namely, the Thai government, the Bank of Thailand, the World Bank, the Asian Development Bank, the Kreditanstalt fur Wiederaufban and the Japan Export-Import Bank. During the past few years, it has borrowed from the international market. Its capital, retained earnings, and debenture issues also provide loanable funds.

The IFCT makes term loans for financing fixed assets and permanent working capital. Loans are repayable up to 15 years but the average maturity is seven to eight years, including a grace period of two to three years. In addition to lending activities, it also provides specialized services to industries and has introduced securities underwrtiting services.

The Small Industries Finance Office (SIFO) was established in 1964 as an office in the Industrial Promotion Department of the Ministry of Industry. Its principal objective is to provide financial assistance to small industrial enterprises including cottage and handicraft industries. The SIFO's source of funds is limited to government budget appropriations. These funds are deposited with a government-owned bank, which supplements them at a ratio of three to one. Medium and long-term loans of up to one million baht are made at low interest rates. Approval of loan applications is given by SIFO, but collateral evaluation and lending operations are undertaken by the government bank. In 1993, the operations of SIFO were taken over by the Small Industry Finance Corporation (SIFC), with increased loan ceiling up to five million baht per borrower. The sources of funding are from the Thai Government and financial institutions.

The Government Housing Bank, established in 1953, is entirely owned by the government. Its basic function is to provide financing facilities to low-income families to obtain houses of their own. Its sources of funds are borrowings fro the government, the Government Savings Bank, the commercial banks, its own capital and retained earnings, and limited savings deposits fro the public.

The Export Import bank of Thailand was established in 1994. Its basic function is to provide medium-term credit for agricultural export, long-term credit for capital goods export, export insurance service, investment guarantee for overseas investment of Thai investors and financing small and new exporters without access to commercial bank lending. The bank also finances import of machinery and equipment used for export production and import of goods beneficial to environment. Its source of funding is for the Bank of Thailand and financial institutions, local and overseas.

If you want to read some interesting topics, select the following information :

                        Bounty of the Land and 
                        Sea | Sector Performance 
                        | The Agriculture and 
                        Mining Sectors | Major 
                        Crops | Livestock 
                        | Forestry | Fisheries 
                        | Mining | The 
                        Manufacturing Sector | Tourism 
                        | The Organized Financial 
                        Market | The Bank 
                        of Thailand | Other Sources 
                        of Finance | The Capital 
                        Market | The Role of the 
                        Public Sector | Infrastructural 
                        Support | Public Utilities 
                        | Government Incentives 
                        and Financial Assistance | Foreign 
                        Trade and Balance of Payments | Conclusion 

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