2022 survey by the Puey Ungphakorn Institute for Economic Research showed that up to 60% of all small businesses resorted to informal lenders for funding while 42.3% of households had informal debt averaging at ฿54,300 per capita with 40.8% of all loans taken out informally outside the financial system.

A loan shark was arrested this week in Nonthaburi after charging a victim a loan rate of 730% per annum, collecting 160% of the amount owed and still mounting a campaign of terror against his victim who was forced to flee his home and business. The borrower found he could not repay the loan at such an extortionate rate of interest and was forced to report the matter to the police.

Police on Tuesday as they arrested Mr Nat Bangkruai in Nonthaburi on foot of a Provincial Court warrant issued on the 17th of July for a number of offences related to illegal money lending activities and a campaign of intimidation which included threatening violence against a small business owner who was charged an interest rate of 730% per annum on a loan of ฿20,000.

On Tuesday, Thai police in Nonthaburi arrested a loan shark who had forced a small businessman to close his business and leave home after borrowing ฿20,000 from him leading to a campaign of intimidation and terror.

The story gives a clear idea of the dark underworld of informal lending in Thailand as the country’s household debt crisis worsens and credit becomes unavailable to a large segment of the population, particularly those involved in the informal business sector including many of Thailand’s small shops and traders.

Arrest warrant issued on the 17th of July 2023 against the Nonthaburi-based loan shark known as Nat Bangkruai after borrower asked the police for help

Police Major General Puttidet Boonkraphue of the Economic Crime Suppression Division of the Royal Thai Police briefed the media on the arrest of Mr Nat based on a warrant issued on July 17th, 2023. 

The warrant specified offences such as the operating of a personal loan business without permission, demanding interest above the specified rate defined by the law and collecting debt in a manner which threatened violence.

The loan was taken out by the small retailer for ฿20,000 at an interest rate of 730% per year or ฿400 per day. The businessman managed to pay back ฿32,000 or 160% of the amount borrowed.

The borrower, however, still owed most of the principal and when he discovered he could no longer pay the interest required on the mounting debt, the loan shark began a campaign of intimidation against him with visits to his house and his place of business.

Loan shark faces several charges

The borrower was eventually forced to move away from the area before finally making a report to the police.

Responding to the case, investigating officers took a detailed statement from the small businessman and applied to Nonthaburi Provincial Court for an arrest warrant. 

It is understood that the loan shark has confessed to the crime and is being held while legal proceedings are progressed against him. 

Loans in Thailand are governed by laws relating to banks and the Civil Code. 2022 survey showed that 42.3% of Thai households had borrowed informally

Loans in Thailand are governed by the Thai Civil and Commercial Code, Sections 650 to 656 which specify a maximum annual interest rate of 15% per annum although legislation in parliament allows banks and financial institutions to charge rates of up to 25% per annum under the auspices of the Bank of Thailand. 

The provisions also specify that any loan over ฿2,000 must see a written contract between the lender and the borrower.

Bank of Thailand to tackle household debt in new plan from 2024 which will see higher standards

A study conducted by the Puey Ungphakorn Institute for Economic Research in February 2022 across 12 provinces with a sample of 4,800 households showed that 42.3% of them resorted to informal debt to raise funds as required with the average loan outstanding being ฿54,300 per head.

The same survey showed that of the total debt outstanding for the combined number of households surveyed, 40.8% was owed to informal lenders.

The survey revealed that 28% of households had borrowed informally to repay existing debt obligations while up to 60% of small business owners used informal lenders in the course of their business for investment in stock and other business activities at rates that varied from 10% to 25% per annum.

Join the Thai News forum, follow Thai Examiner on Facebook here
Receive all our stories as they come out on Telegram here
Follow Thai Examiner here

Further reading:

Bank of Thailand to tackle household debt in new plan from 2024 which will see higher standards

Politicians skating on thin ice as the economy may not be able to withstand a political stalemate

Debt crisis may be one of the top items on the new cabinet’s agenda as central bank stands ready

Potential hazard lights flashing as kingdom’s auto loans spiral into default with sky-high borrowing

Bank of Thailand governor gives veiled warning to voters on the danger posed by populist policies

Financial markets debt sell-off sending a signal to Thailand before the May 14th General Election

PM warns giveaway policies of some parties may be ‘bad karma’ for the country in the longer run

Economic recovery shaky despite strong foreign tourism as global economic outlook deteriorates

Recession fears rise as growth projections are cut and export output continues to decline in 2023

Good news on foreign investment at the start of 2023 fails to mask stunted competitiveness issue for economy

Economy faces export clogs with rules in China and ‘green imperialism’ from European Union

Vital European Union free trade deal with Thailand with stiff demands from Brussels to take time

Thailand’s financials are sound but the economy is exposed if another world banking crisis emerges

Thai economic woes grow with a 10-year high trade deficit as January exports slumped by 4.5%

Credit crunch as firms seek more bank loans with tightened lending criteria and recession fears

Even as the baht surges, Thailand faces economic recession in mid-2023 with lower earnings

Thailand’s trade agenda may be complicated and thwarted by raised tensions in the Indo Pacific region