Picofinance draws crowd
More than 50 applicants are seeking picofinance licences, including several goldsmiths and pawnshops, says an informed source at the Finance Ministry.
The ministry is screening applicants for microfinance service now, the source said.
The relevant regulation requires the ministry to approve picofinance licences within 60 days after applicants submit all required documents.
The ministry opened the application period for picofinance licences on Dec 1, 2016.
The ministry is hoping picofinance operators can help those who are at the bottom rung of the income scale better access formal financial sources and stay away from loan sharks. They are permitted to lend for general purposes and are limited to lending 50,000 baht per borrower at a maximum rate of 36% a year.
Picofinance operators are required to have minimum registered capital of 5 million baht, far below the minimum of 50 million baht required for nanofinance companies.
Nanofinance is another government initiative, also meant to widen alternatives for low-income earners to access lending, but so far it has done little in helping to weaken loan sharks as nanofinance operators can only lend for occupational purposes.
Nanofinance operators can lend a maximum of 100,000 baht per borrower and have a ceiling interest rate of 36% a year.
Nanofinance operators can provide service across the country, while picofinance operators are confined to a particular province.
The source said the Finance Ministry found most of the picofinance applicants lack the skills to arrange a business plan.
Picofinance service gives an opportunity for goldsmiths and pawnshops to diversify their business and charge higher interest rates, the source said.
Both pawnshops and goldsmiths are now engaged in lending to customers, but they cannot charge borrowers more than 15% per year to comply with the Civil and Commercial Code.
Given that pawnshops and goldsmiths are familiar with borrowers from non-financial institutions in their areas, they believe they can better evaluate the risks, the source said.
There are 23 nanofinance service providers and that have extended 2 billion baht worth of loans, with non-performing loans below 1%.