The National Reform Steering Committee on Economy Sub – Committee on Monetary and Finance,


Chairperson: Mr. Somchai Ruchupan          


“The Draft Act on Community Financial Institution can help raise the status of microfinance institutions of the country to become Community Financial Institutions, which may
form microfinance institution network, to reduce economic disparity and help people gain to the financial funds.”



Nowadays, most of the microfinance institutions cannot provide their full financial services and lack operational stability, because of the emphasis on personal dependence. Once the leading personnel are changed, the process could not be continued.


This results in insecurity, limitation on administration, risk and accounting management. Some institutions have no juristic personality. Even the government sector lacks clear orientation in policy making and close oversight of the issue, which causes non-uniformity among the relevant agencies.


Therefore, the development of microfinance system lacks progress. Most of the low-income people cannot fully access to the quality financial service. They inevitably have to rely on informal finances and eventually become exploited. Some of the microfinance institutions are vulnerable to failure, which may adversely affect the entire economy.


In order to reduce disparity and to uplift the quality of low-income people’s life, it is necessary to set the policy framework, distinctive operational guidance, and to strengthen the community microfinance institutions, in order to be an important mechanism rendering economic system. Accordingly, the Draft Act on Microfinances is needed to enable the financial access for low-income people. The economic problem has always been a biggest issue that causes disparity in Thai society, which subsequently leads to other domestic crises.


Despite there are numbers of commercial and state banks that cover for more than 74.2 percent of the scope of works, more than 25.8 percent of the people still have no access to the banking system of Thailand. Some people still have to rely on informal finances. Some local communities established their own saving institutions, such as saving cooperative (to which 2.4 percent of people can access), village funds or saving groups (to which only 5.2 percent of people can access). And up to 18.1 percent of the people have no access to any financial systems.


The executives of the above groups lack knowledge in financial management and systematical administration, as most of them are communities’ leader. These factors create the inability to a better improvement. Some institutions are facing financial problems, some emphasize on loan more than saving, which create weakness in local economy and cannot keep on their wealth and stability.


Moreover, cooperatives and microfinance institutions have no legal support. Most of the village funds has no juristic personality and lacks network connectivity, resulting in circumstances in which they are unable to render full services and to develop at their fullest potential. This draft bill is thereby needed to serve as a supporter for community financial institutions.


This draft bill will raise the status from loaning fund to be a saving fund, which will categorize and improve around 3,500 – 7,000 community financial institutions, to be the community financial institution within the next 5 – 10  years. This will emphasize on community financial institution development and connection of each other as “microfinance institution networking”, which is the main pillar of improvement helping further the economic integration of the nation.


In addition, the commission on microeconomic development is established to improve the administrative skills of executives in the networking within financial institutions. This is aimed to steer the strategies and to formulate master plan on integrated work of all sectors, which may create the mechanisms for the system development of microfinance institutions in the long run.

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