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Appraising the Thailand village fund

Author

Listed:
  • Boonperm, Jirawan
  • Haughton, Jonathan
  • Khandker, Shahidur R.
  • Rukumnuaykit, Pungpond

Abstract

The Thailand Village Fund is the second-largest microcredit scheme in the world. Nearly 80,000 elected local Village Fund committees administer loans that reach 30 percent of all households. The value of Village Fund 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 more than 3,000 Village Funds conducted in 2010, this paper evaluates the performance of Village Funds, which it argues are best modeled as altruistic, and do not appear to be subject to elite capture. As expected, profit rates are difficult to model, but the regression analysis shows that loan recovery rates, total lending, credit ratings, and the proportion of loans going to the poor are all higher when a Village Fund borrows additional funds from a formal bank and on-lends to households, as was done by one in five Village Funds. An economic analysis suggests that Village Fund benefits exceed the costs. Most Village Funds are social rather than financial intermediaries; they have little incentive to take risks or to innovate, which explains why Village Fund lending has not kept pace with the growth of the Thai economy.

Suggested Citation

  • Boonperm, Jirawan & Haughton, Jonathan & Khandker, Shahidur R. & Rukumnuaykit, Pungpond, 2012. "Appraising the Thailand village fund," Policy Research Working Paper Series 5998, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5998
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    References listed on IDEAS

    as
    1. Paolo Casini, 2008. "Competition and Altruism in Microcredit Markets," Working Papers ECARES 2008_037, ULB -- Universite Libre de Bruxelles.
    2. Abhijit V. Banerjee & Esther Duflo, 2010. "Giving Credit Where It Is Due," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 61-80, Summer.
    3. Michael Lokshin & Zurab Sajaia, 2004. "Maximum likelihood estimation of endogenous switching regression models," Stata Journal, StataCorp LP, vol. 4(3), pages 282-289, September.
    4. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
    5. Menkhoff, Lukas & Rungruxsirivorn, Ornsiri, 2011. "Do Village Funds Improve Access to Finance? Evidence from Thailand," World Development, Elsevier, vol. 39(1), pages 110-122, January.
    6. Joseph P. Kaboski & Robert M. Townsend, 2012. "The Impact of Credit on Village Economies," American Economic Journal: Applied Economics, American Economic Association, vol. 4(2), pages 98-133, April.
    7. Joseph P. Kaboski & Robert M. Townsend, 2011. "A Structural Evaluation of a Large‐Scale Quasi‐Experimental Microfinance Initiative," Econometrica, Econometric Society, vol. 79(5), pages 1357-1406, September.
    8. Boonperm, Jirawan & Haughton, Jonathan & Khandker, Shahidur R., 2009. "Does the village fund matter in Thailand ?," Policy Research Working Paper Series 5011, The World Bank.
    9. Bardhan, Pranab & Udry, Christopher, 1999. "Development Microeconomics," OUP Catalogue, Oxford University Press, number 9780198773719.
    10. Joseph P. Kaboski & Robert M. Townsend, 2005. "Policies and Impact: An Analysis of Village-Level Microfinance Institutions," Journal of the European Economic Association, MIT Press, vol. 3(1), pages 1-50, March.
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    Citations

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    Cited by:

    1. Wagstaff, Adam & Manachotphong, Wanwiphang, 2012. "Universal health care and informal labor markets : the case of Thailand," Policy Research Working Paper Series 6116, The World Bank.
    2. Khandker, Shahidur R. & Koolwal, Gayatri B. & Badruddoza, Syed, 2013. "How does competition affect the performance of MFIs ? evidence from Bangladesh," Policy Research Working Paper Series 6408, The World Bank.
    3. Wagstaff, Adam & Manachotphong, Wanwiphang, 2012. "The health effects of universal health care : evidence from Thailand," Policy Research Working Paper Series 6119, The World Bank.

    More about this item

    Keywords

    Debt Markets; Banks&Banking Reform; Bankruptcy and Resolution of Financial Distress; Investment and Investment Climate; Economic Theory&Research;

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