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MICROFINANCE PAPER WRAP-UP: Poverty, Income Inequality, and Microfinance in Thailand; By Kelly Bird, Kelly Hattel, Eiichi Sasaki and Luxmon Attapich; Published by the Asian Development Bank

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By Kelly Bird, Kelly Hattel, Eiichi Sasaki and Luxmon Attapich; Published by the Asian Development Bank; November 2011; 23 pages; available at

The authors of this paper provide an overview of the level of poverty and income inequality in Thailand and discuss the potential role that microfinance can play in addressing these issues. The authors deem Thailand’s microfinance sector to be currently “undeveloped” in comparison with its counterparts in Southeast Asia.

In 2008 the Thai government conducted its Household Socio-Economic Survey and found that Thailand’s poverty rate has declined from approximately 33.8 percent in 1988 to 9 percent in 2008. However, the survey indicates that Thailand’s Gini index of household income – a measure of income inequality – stands at around 0.51, signaling that its income distribution remains skewed toward a small share of the population. Moreover, high rates of poverty are concentrated in low-per-capita-income regions of the Northeast where the majority of households are engaged in the agriculture sector. Savings and asset distribution in Thailand also follow a pattern similar to that of income distribution.


authors find that Thailand’s microfinance sector is very small and undeveloped, ranking at the bottom of the scale in both regional and global terms, based on an evaluation of the country’s microfinance regulatory framework, investment climate and institutional development. Regulations identified as impediments to the development of the microfinance sector include a 15-percent interest rate ceiling for loans disbursed by nonbanking financial institutions (NBFIs), licensing restrictions to market entry for microfinance institutions (MFIs) and government-subsidized programs cause an oversupply of credit.

The authors offer the following recommendations to support the government’s efforts to use microfinance as a strategy to promote financial inclusion: (1) open the microfinance sector to greater private-sector participation (2) strengthen the supervisory capacity of the Bank of Thailand’s microfinance division; (3) limit the role of government operations in microfinance; (4) develop a microfinance credit information bureau; (5) create an enabling environment for mobile phone banking and mobile branches; (6) develop a regulatory framework to promote the growth of microinsurance; and (7) develop a national financial literacy program aimed at low-income households.

By Jacqueline Foelster, Research Associate

Category: Payday loans

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