Paper

Moneylending and Modern Times: Informal Credit in Thailand

How has economic development affected informal finance?

This paper reports on the financial situation of a Thai village, situated about 70 km from Bangkok, based on a survey conducted in 1990. It illustrates the variety of borrowing and lending patterns against a background of specific economic activities. The paper focuses on changes in these patterns which have arisen through rapid growth in the area of the village.

Findings suggest:

  • Scope of responses of informal financial activities to modern times is wider than commonly assumed;
  • Informal credit has not declined in the course of economic development as expected;
  • New viable informal credit institutions have emerged as a reaction to the rise in land prices
  • while informal credit is commonly believed to serve credit needs of the poor, the study finds the bulk of credit goes to the better-off households;
  • Poor are excluded from virtually all sources of informal and formal credit;
  • Indebtedness does not necessarily occur as a result of economic hardship and is more a sign of wealth than poverty.

The paper casts doubts about results of nation-wide surveys of recent years showing a decline of the informal finance market share.

About this Publication

By Steinwand, D.
Published