Roles of agricultural cooperatives and village credit unions in rural financial markets in Thailand, Paradorn Preedasak Viroj NaRanong, Thailand

This study examines agricultural cooperatives and village credit unions (kloom orm sup) in rural financial markets in Thailand. Both organizations serve as lending sources and mobilize savings in rural Thailand. The study focuses on factors that determine their successes and failures. It also attempts to provide a brief assessment of the ability of these organizations to become viable sources of credit in rural areas and their competitiveness relative to the Bank for Agriculture and Agricultural Cooperatives (BAAC). Cooperatives were founded and have been promoted by the government since 1916, with agricultural cooperatives as one of the oldest types of cooperative. Agricultural cooperatives have the largest number of branches and members. Like most cooperatives in Thailand, agricultural cooperatives are far from being successful. Their major role today is to provide credit to members. For most agricultural cooperatives, the major source of funds is the BAAC. However, figures from recent years indicate that they have been more active and successful in mobilizing savings themselves. Village credit unions are organizations founded to mobilize savings and later to serve as small financial intermediaries in rural areas, usually at the village level. Union members pledge to save a certain amount of money each month. In most cases, the money is lent out immediately to borrowers, most of whom are also members of the group. Credit unions have been promoted by the Department of Community Development (DCD), Ministry of Interior (MOI) since 1974; however, most credit unions remain private organizations. Some charge higher interest rates, higher than the legal ceiling, yet lower than the rates normally charged by informal lenders. Except for a handful of village credit unions in the southern region, most credit unions are small and accessible to only one village. Overall, the volumes of savings and loans through credit unions are rather small. The organization of the chapter is as follows. Section II describes agricultural cooperatives and their roles. Section III deals with village credit unions. Section IV discusses underlying factors that determine successes and failures of both organizations. The last section provides conclusions and policy implications.

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