Thailand is one among the fast-growing Asian markets and tourism provides not less than 10% of the gross domestic product. The economy of this country is thriving and people from many parts of the world select Thailand as one of their holiday destinations. In spite of the booming economy and the rising markets, many people in Thailand are desperately in need of financial assistance especially when the costs go up all of a sudden. Many people are with the wrong impression that online payday loans are not legal in Thailand. The real fact is that online payday loans as such are not illegal here but, the high rates of interest quoted by the payday loan providers are illegal. In Thailand, quick money is readily available for those who are in need but, unfortunately the interest rates for the quick money are often so high that they are illegal. The Thailand people call these loans as “loan sharks” or “out of system loans.” Those who offer these “out of system loans” cannot give online or offline advertisements of such loans since such advertisements are prohibited by the Thai government. Because of this prohibition the lenders of such loans resort to old and uncivilized ways of advertising like writing on the walls of public toilets, etc. However, easy loans create a problem for many citizens.
Individuals and small companies provide the quick money loans in Thailand and there are a lot of such lenders all over the country. As a matter of fact, a lot of borrowers in Thailand go for these “out of system loans” whenever they are in need of quick money. They get the loan from the individual lenders or the small companies that provide such loans. As already mentioned the borrowers are charged with very high interest rates by the lenders. With the intention of capturing the market of these loans for which the interest rates are illegal, the government of Thailand introduced the “Pico Finance”. When compared to the loans offered by the major banks in Thailand the Pico loans are easier for the borrowers to obtain. However, the average Thai people are not happy with the Pico loans since the eligibility conditions for obtaining the loan are very tough. The majority of the borrowers find the conditions too difficult to fulfill. The conditions include ownership of a house, regular high salary remitted to the bank, etc. These conditions are too high for the ordinary people to fulfill.
Rules and Conditions for Peer – to – Peer lending
In April, 2019, Bank of Thailand issued the first notification regarding the rules, conditions and procedures for P2P lending. According to the notification, the person who provides the P2P platform should have an electronic system or network for the lending operations. The P2P platform providers must be financially sound. It should not be a financial institution but should be a company incorporated in Thailand. The company should have a minimum paid-in capital of THB 5 million and minimum 75% of the company’s shares must be held by Thai nationals. The platform providers are not permitted to hold the money, assets and securities of the borrowers and lenders and a custodian will be appointed who will be either an authorized custodian under SEC regulations or an authorized custodian under an authorized commercial bank as per Bank of Thailand rules and regulations.
The borrowers must be natural persons and should not be platform providers, directors or authorized persons of the platform providers. Credit limits are worked out based on the monthly income of the borrower and cash inflow to his bank account. In case loan is for business purpose the credit limit can be higher. Lenders should be natural or juristic persons and should not be platform providers. Maximum credit limit for individual lenders is fixed at THB 5,000,000 per year. Borrowers should not have obtained personal loans previously from three lenders.