Farmers' debt crisis:ธ.ก.ส. plans drastic reduction!

Farmers' debt crisis:ธ.ก.ส. plans drastic reduction!

At the heart of Thai agriculture, farmers face daunting financial challenges, particularly those aged over 70, which brings a very specific framework into focus of the discussion. How Post Today reported, นายฉัตรชัย has outlined the difficulties these farmers face when it comes to their debts to the Bank of Agriculture and Agricultural Cooperatives (ธ.ก.ส.).

Many of these farmers juggle multiple contracts – often between seven and eight – that include both long-term loans and working capital loans. These include some contracts that are classified as non-performing (NPL), while others are still in good standing. The collateral on which these loans are based is often far from simple, consisting of a mix of real estate, people and cross guarantees, while many farmers are simply unable to provide property collateral.

A look at the debt structure

Total NPL debt values ​​for this older group of debtors are a staggering 5.5 billion baht, while collateral values ​​are over 10 billion baht. But the situation remains tense as the bank is on hold from the Finance Ministry for clear guidelines on debt reduction. There are around 10,000 accounts with 4-5 billion baht in debt, and more than 70% of the outstanding loans are among older farmers, who are considered particularly vulnerable Thai Post reported.

The current level of non-performing loans (NPL) is 5.31%, with a slight increase in the last two months. In view of this, ธ.ก.ส. plans to limit the NPL ratio to a maximum of 5.5% in 2025 and has already taken steps to set up an internal Asset Management Company (AMC). This is intended to help reduce debts of farmers older than 70 years without having to wait for a joint venture to be formed.

Strategies to support farmers

However, the bank is not satisfied with theoretical measures. It promotes the development of “Smart Farmers” and “Young Smart Farmers” to increase productivity. This could be helpful as the lack of offspring in agriculture is an additional problem. While interest rates have already been reduced, many customers have already taken advantage of deferment programs to ease their repayments.

Another significant issue is the repayment of debts from the previous government's rice purchasing program, which remains under review by the Budget Office. However, the bank finds itself in a difficult position as it has no influence on the budget distribution, which is managed by the budget office.

In summary, the challenge for the bank and the affected farmers is great. But thankless circumstances require creative solutions, and the bank is working hard to help affected farmers while keeping its financial goals in mind. The coming months will be crucial to see how the bank responds to the Treasury's strict guidance and what new strategies may come to the table to help this critical sector of the Thai economy. More information about the NPL data can be found at CEIC data.