Two million Thai farmers in debt for life
A study by a research centre linked to Thailand’s central bank highlights a spiralling debt crisis in the agricultural sector, exacerbated by ineffective payment practices and short-term government policies, to the point that in recent years farmers have been able only to pay the interest.
Bangkok (AsiaNews) – More than half of Thai farmers who have taken out a loan are unlikely to repay it within their lifetime, this according to a study by the Puey Ungphakorn Institute for Economic Research (PIER), a research centre linked to the Bank of Thailand, which highlights the structural nature of the debt crisis in the agricultural sector.
The paper notes that 52 per cent of the approximately 3.97 million farmers listed in the National Credit Bureau database (out of 11 to 16 million farmers nationwide) will not be able to repay their loans in the future. It is estimated that a large number will repay their debts only after they reach the age of 70, when their income-earning capacity has declined significantly.
The study, conducted in cooperation with the Bank for Agriculture and Agricultural Cooperatives, was based on data collected between 2017 and 2025.
Two main factors explain the debt crisis: limited repayment capacity and inefficient payment behaviour.
About 42 per cent of farmers currently lack sufficient income to service their debt, since they face recurring drops in income.
One problem is the misalignment between repayment deadlines and agricultural income cycles. Only 25 per cent of farmers do not require assistance, while over 65 per cent are unable to effectively manage their increasingly fragmented and diversified income to pay off their debts.
Of these, 22 per cent already have debts beyond their ability to repay, meaning they would be unable to meet their payments even if they improved their habits.
Transaction costs also pose a barrier: travelling costs to bank range between 300 and 1,000 baht (US$ 10 to 30) per visit, discouraging frequent small payments.
In recent years, interest-only payments have become increasingly common. According to the PIER study, the share of borrowers limiting themselves to this type of repayment has risen from 20 per cent to over 50 per cent in eight years, while only 10 per cent of farmers are actually able to reduce their outstanding principal.
This has been facilitated by debt relief measures adopted over the years by the Thai government (temporary suspension of instalments, interest reductions or freezes, debt restructuring with extended repayment terms, and in some cases, subsidies or government guarantees on agricultural loans), which have ultimately consolidated the debt spiral rather than resolved it.
Furthermore, the debt problem among farmers is more serious than official data suggest, PIER notes. In fact, according to official statistics, non-performing loans (loans that are no longer repaid or are significantly overdue) represent only about 10 per cent of total household debt; however, many farmers continue to make payments, so they are not included in the non-performing loan percentage, even though they are effectively trapped in permanent debt.
Meanwhile, the amount of debt has grown. The median for farmers has risen from 200,000 to 250,000 baht (around US$ 6,200 and US$ 9,300), about three times higher than that of other household groups.
Over 30 per cent of debtors have seen their debt more than double in the past eight years, while another 30 per cent currently have debts exceeding 500,000 baht (about US$ 15,500).
PIER therefore urges the Thai government to avoid new short-term policies, which often rely on subsidies and payment suspensions, and focus instead on structural reforms.
The institute highlighted what ought to be the government's priorities: increased public investment, public-private partnerships, the use of digital technologies and artificial intelligence to improve credit management, and support for agricultural incomes.
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19/07/2005
07/07/2021 16:48
