Microcredit on a Large Scale: Appraising the Thailand Village Fund
The Thailand village fund (VF) is the second‐largest microcredit scheme in the world. Nearly 80 000 elected local VF committees administer loans that reach 30 percent of all households. The value of VF 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 over 3000 local VFs conducted in 2010, we evaluate the performance of the VF. As expected, profit rates are hard to model, but our regression analysis shows that loan recovery rates, total lending and the proportion of loans going to the poor are all higher when a VF borrows additional funds from a formal bank and on‐lends to households, as done by one in five VFs. An economic analysis suggests, tentatively, that VF benefits exceed the costs. A financial analysis shows that VFs more than break even, with receipts covering their cash costs. Most VFs are social rather than financial intermediaries; they have little incentive to take risks or to innovate, which explains why VF lending has not kept pace with the growth of the Thai economy.
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