Appraising the Thailand Village Fund

51 Pages Posted: 20 Apr 2016

See all articles by Jirawan Boonperm

Jirawan Boonperm

affiliation not provided to SSRN

Jonathan Haughton

Suffolk University - Department of Economics

Shahidur R. Khandker

World Bank - Development Research Group (DECRG)

Pungpond Rukumnuaykit

affiliation not provided to SSRN

Date Written: March 1, 2012

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

Suggested Citation

Boonperm, Jirawan and Haughton, Jonathan H. and Khandker, Shahidur R. and Rukumnuaykit, Pungpond, Appraising the Thailand Village Fund (March 1, 2012). World Bank Policy Research Working Paper No. 5998, Available at SSRN: https://ssrn.com/abstract=2022843

Jirawan Boonperm (Contact Author)

affiliation not provided to SSRN

No Address Available

Jonathan H. Haughton

Suffolk University - Department of Economics ( email )

8 Ashburton Place
Boston, MA 02108
United States
617-641-4852 (Fax)

Shahidur R. Khandker

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Pungpond Rukumnuaykit

affiliation not provided to SSRN

No Address Available

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