Thai small business owner Watcharin Romyen thought she had solved her mounting debt after coming across leaflets left by money lenders on an electricity pole in her neighborhood.
Little did the 42-year-old know that she was entering into a cycle of high-interest collection in which, she said, loan sharks pursued her, leaving her in near financial ruin and with a mental breakdown.
“I had borrowed from all my relatives and I didn’t know what to do,” Watcharin, who owns an ice distribution business, told BenarNews.
She recalled how, one morning, she had decided to call the number of a money lender listed on one of the leaflets.
“And by noon he arrived at my door. He looked like he was well-to-do. He dressed well and drove a nice car.
“After I took out loans from money lenders and failed to pay up the interest, they called me and said they would come to destroy my house.”
Despite being an upper-middle income country, the minimum wage in Thailand is as little as U.S. $10 (328 baht) per day and its household debt is among the highest in Asia.
In January, Thai economic think-tank TTB Analytics said that by the end of 2024, household debt could reach 16.9 trillion baht ($469 billion), or 91% of the GDP. It blamed factors including stagnant growth, high costs and a lack of financial discipline hindering a debtor’s ability to pay.
As one of those debtors, Watcharin decided to join the government’s informal loan fixing program following its launch in December. To date, as many as 10 money lenders have agreed to default her loans as a result of the negotiations mediated by government representatives.
By the end of January, more than 135,000 people holding loans valued at over 9 billion baht ($250 million) had registered in the program. About 15,000 cases have entered into a debt settlement process, according to the government, which noted that in 165 cases a settlement could not be reached and had been prosecuted by the police.
The loan values are only the tip of the iceberg. The Thai government earlier estimated that informal loans – those given through sources other than banks and lending institutions – totaled 50 billion baht ($1.4 billion).
“Informal debts have eroded Thai society for so long and are the causes of many social problems,” Prime Minister Srettha Thavisin, whose government took office in September, said in November.
“The people are the foundation of the country, but they are vulnerable because of overwhelming debts that cannot be paid off. I consider Informal debts to be a “modern-world slavery” that takes away freedom and dreams from the people in our time.”
Slow recovery
Back during the COVID-19 lockdown in Thailand, Watcharin’s business took a hit as many of her clients, including restaurants and coffee shops, went under.
Located an hour outside of Bangkok, Watcharin’s business orders blocks of ice, cuts them up and delivers them to other businesses. Recovery has been slow since the pandemic passed.
“I have six men working with me. They all drive three delivery trucks, so I pay them and pay for the gas and the ice every day. I also have three children, all in school, and I am a single mother.”
While Watcharin needed cash in June 2023, borrowing from a loan shark led to even more debt as interest – extracted on a daily basis – accumulated. Her failure to keep paying resulted in a default of all interest already paid.
“I had to borrow from the loan sharks because if I borrow from the bank, the money cannot (arrive) soon enough for me to use it.”
“I borrowed 15,000 baht ($418) from him, but I received 13,500 baht ($376) because 750 baht ($209) was deducted for the document process and another 750 baht was interest.”
The money lender’s scheme is that 750 baht has to be paid every day within a 24-day cycle. If Watcharin were to complete this cycle, she would have paid 18,000 baht – the original 15,000 baht loan and 20% interest paid in less than a month.
Thai law stipulates that a lender cannot provide a loan with an interest of more than 15% per year.
A breakup of this cycle would mean invalidation of any interest payment, no matter how much she had paid. Because Watcharin struggled to complete the cycle with different money lenders, she kept missing her interest payment.
By December when she joined the government’s program, she estimated she had paid 130,000 baht ($3,625) to lenders as she kept restarting the cycle without paying off the actual loans.
Getting out of debt
The government’s efforts to clear up debts include acting as a mediator between the lender and the borrower. Watcharin’s case was handled by a local district official who negotiated with her lenders, citing outstanding interest from the illegal rate she had paid.
But a larger aim is to prevent people falling into debt again while supporting access to regular bank loans, said Srettha, who also serves as the finance minister and aims to fix the economy and Thais’ income.
Other measures to overhaul Thailand’s debt problems include fixing a debtor’s credit, devising new payment schemes for credit card debtors, low-interest loans, for example. A finance ministry spokesperson said this month the scheme would cover over 10 million people with institutional loans and some 1.6 million with informal loans.
Achin Chunglog, president of the Supa Wongsaena Foundation for Debtors’ Rights Reform, a local NGO, has been working on debt cases for over two decades and has consulted with Watcharin. She said this period was the worst she had seen.
“Individual debts started to accumulate before COVID, and when COVID started they exploded because people were out of jobs and failed to service their debts,” Achin told BenarNews. “Most people borrow to cover everyday expenses because they don’t earn enough.”
Achin said debtors come in all forms. They can be workers indebted to loan sharks or institutional loans such as mortgages, while others can be owners of small and midsized businesses with debts ranging from 20 million to 30 million baht ($558,000) to ($837,000).
Certain workers in Thailand such as teachers could be in debt “200 to 300 times their salary,” Achin said, because “teachers’ saving co-ops provide loans without checking their credit details.”
She advised debtors to divide a sum of money for expenses and debt payments as part of their plans.
“Most Thai people don’t have savings or fail to set up an emergency fund for a three-month or six-month period. We should look forward to creating this emergency money in the future,” Achin said.