Appraising the Thailand village fund

Jirawan Boonperm, Jonathan Haughton, Shahidur Khandker () and Pungpond Rukumnuaykit

No 5998, Policy Research Working Paper Series from The World Bank

Abstract: The Thailand Village Fund is the second-largest microcredit scheme in the world. Nearly 80,000 elected local Village Fund committees administer loans that reach 30 percent of all households. The value of Village Fund loans has remained steady since 2006, even without new infusions of government funds, and loans go disproportionately to the poor. Based mainly on a custom-built survey of more than 3,000 Village Funds conducted in 2010, this paper evaluates the performance of Village Funds, which it argues are best modeled as altruistic, and do not appear to be subject to elite capture. As expected, profit rates are difficult to model, but the regression analysis shows that loan recovery rates, total lending, credit ratings, and the proportion of loans going to the poor are all higher when a Village Fund borrows additional funds from a formal bank and on-lends to households, as was done by one in five Village Funds. An economic analysis suggests that Village Fund benefits exceed the costs. Most Village Funds are social rather than financial intermediaries; they have little incentive to take risks or to innovate, which explains why Village Fund lending has not kept pace with the growth of the Thai economy.

Keywords: Debt Markets; Banks&Banking Reform; Bankruptcy and Resolution of Financial Distress; Investment and Investment Climate; Economic Theory&Research (search for similar items in EconPapers)
Date: 2012-03-01
New Economics Papers: this item is included in nep-hme, nep-mfd and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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