Credit Segmentation and Household Vulnerability in Thailand: Formal Versus Informal Debt Risks

Sanha Hemvanich, Kanokwan Chancharoenchai () and Nattanicha Chairassamee
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Sanha Hemvanich: Department of Economics, Kasetsart University, 50 Ngamwongwan Rd., Ladyao, Chatuchak, Bangkok 10900, Thailand
Kanokwan Chancharoenchai: Department of Economics, Kasetsart University, 50 Ngamwongwan Rd., Ladyao, Chatuchak, Bangkok 10900, Thailand
Nattanicha Chairassamee: Department of Economics, Kasetsart University, 50 Ngamwongwan Rd., Ladyao, Chatuchak, Bangkok 10900, Thailand

JRFM, 2025, vol. 18, issue 11, 1-22

Abstract: This study investigates the determinants of household borrowing choices in Thailand, with a focus on the risks associated with formal and informal credit markets. Using cross-sectional survey data from 6949 respondents across 77 provinces collected in September 2021, we employ multinomial regression models to analyze how demographic, occupational, and income factors shape debt outcomes. The results indicate that younger and lower-income individuals in Bangkok are more likely to remain debt-free, while older, higher-income, and farming households are strongly associated with formal borrowing. In contrast, unemployed individuals, retirees, business owners, and freelancers disproportionately rely on informal credit channels, exposing them to high interest rates, repayment difficulties, and heightened financial risk. Regional disparities further underscore structural inequalities: households in the north and northeast are more likely to access formal finance, whereas those in Bangkok and the south tend to turn to informal lenders. These findings highlight the risks of financial exclusion and the persistence of informal lending in emerging economies. Policy measures that expand access to regulated credit, promote microfinance, and strengthen consumer protection frameworks are essential to mitigate household financial vulnerability and reduce exposure to debt traps.

Keywords: consumer vulnerability; formal credit; household debt; informal credit (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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