Khonwan

Actually, Andycrosby, I’ve been living here for 18 years, I have no income from abroad, and I have increased my assets each year…and without cheating the poor. This Farmer B considers your two million baht loan portfolio as chicken feed; he does extremely well whilst still retaining respect and gratitude within the community.

I am currently in Bangkok for a couple of nights. Forest fires were blazing 20 metres behind my farm house as I went to sleep in my hotel last night. I have enjoyed a good sleep in the knowledge that most of the guys in my village (2km from my house) were there fighting the fires voluntarily and without reward. That kind of loyalty matters more to me than a few more dirty shekels.

It’s been interesting talking to you here but I wouldn’t care to meet you.

I am not familiar with the economics of growing rice so you, Andycrosby, may well be correct with respect to your area (I only occasionally grow a little hill rice for own use, in areas to wet for cassava). I have had 200 rai for over 10 years, 170 of which is currently cropped with cassava. Somo also confirms that farming cassava on rented land returns more than he obtains by lending. I believe that rent of Bt1,500/rai in my area seems to be more expensive than folks in other parts of Thailand have posted in other threads, yet I could make much more than 36%pa including labour and machinery maintenance (I already own all the required machinery including a couple of tractors). The only reason I don’t do so is due to my personal set of ethics. I tell myself and locals that I have no wish to be rich but that I do wish not to be poor. So, as long as my family have a comfortable standard of living and have no financial worries, I’ll do what I can to assist the community. Somo says that rental land is now difficult to find but, in my area anyway, were I to offer an extra Bt100 or so I’d probably easily rent another 100-200 rai, and still make much more than 36%pa but our friends would become poorer as we grew richer.

Farmer B went out to collect on a quite large debt (loan of Bt100,000) yesterday evening that has already past the one-year repayment date by exactly one month. He holds a legal contract with a full chanote title (land in a town) as security. He is fully entitled to now action transfer of title but does not want to. He has rescheduled payments plus compounded the interest from the original repayment date one month ago (i.e. the interest due at that date now attracts a further 3% per month until the interest, at least, is paid). The borrower, a government teacher, is immensely grateful and Farmer B will collect Bt40,500 today in full payment of interest to-date with the original loan once again be charged at only the original 3% per month hereafter. Said borrower stated yesterday that this Farmer B is the ONLY source of credit available at 3% per month and that this Farmer B is MUCH cheaper than his competitors who appear to have raised their rates recently. I can find no way to call this Farmer B a loan shark yet he would probably be labelled as such by Bangkok Post or The Nation…and by your definition.

Rgds
Khonwan

Thanks, Andycrosby, for your honest and full response. I find your definition strange though since you consider yourself a loan shark simply on the basis that you are not a bank and that you charge high interest despite the fact that you say you charge a maximum of 15%pa. It is not illegal for individuals to lend (indeed, the government publishes and sells standard contract forms for this) at rates not exceeding 15%pa. Still, if that’s how you regard yourself.

I think pawnbrokers charge around 2% per month – are they also loan sharks?

Wouldn't you make more money by farming rented land? I would.

Andycrosby, please explain what you mean by, “I do a bit of loan sharking because that is what it is”. Do you mean that you are a loan shark since you appear, by your own words, to be hoping for default in order to obtain property (or is that simply a threat?), or do you mean that all lending, legal or not, by banks or individuals, formal or informal, amounts to “sharking”? If so, why?

Do you stay within the 15% limit in order to stay within the law? If so, are you then not aware that such contracts by individuals are specifically prohibited in law to apply compounding interest? On a technical point, I assume that annual compounding is allowed but I know that it is not allowed for periods less than one year.

This Farmer B explains to all borrowers that he has no wish to acquire their property, only his interest payments (and principle at some point). This Farmer B obtains rental agreements to easily facilitate sub-renting of their land to another farmer to the extent that it covers the due interest payment in order that the borrower can regain use of his land anytime in the future upon recommencement of interest payments or repayment of the interest.

This Farmer B is delivering a much needed service to the community at a lower cost to them than otherwise available and with maximum flexibility built-in in terms of access, terms, conditions, repayment schedules, etc., whilst still obtaining a return of 36%pa.

Somo, we appear to think alike. I too have found that interest-bearing loans are repaid quicker than non-interest-bearing loans. I also find that family can make the worst borrowers.

Farmer B has found that his provision of credit makes him much more of an asset to the community and much more appreciated than his provision of dozens of computers to his local school and many other gifts to the school, temple and village many years. Farmer B has no problem obtaining willing farm labour.

Disgust with this government over this issue exactly sums up my feelings too, but as for them being unable to come up with a better solution – what was wrong with Abhisit’s price top-up scheme? That ensured that any shortfall between the middleman’s price and the government’s guarantee price (Bt2,400 last year) was paid directly to the farmer. That scheme paid all registered farmers in respect of the actual land area they were actually farming whether owned or rented. I don’t know, but I always expected that the price would have been guaranteed at Bt2,500 this year had the Democratic Party been returned to government. We actually had one local canvasser promoting Yingluck/Thaksin in the run-up to the election promising a cassava price of Bt5,000, which the ordinary highly gullible local farmers believed was in reference to the tuber price though said canvasser would no doubt now claim he was referring to the dried chip price.

BTW, I’m sure that BAAC will ensure all farmers receive their cash who have already sold cassava under the pledge scheme. As I understand it, the middlemen in my area will stop accepting cassava under the scheme at the end of this month, which means I’d better rush!

There are several reasons for the poor market price just now: one reason is this government’s abandonment of the price mechanism that kept benzene much more expensive than gasohol. I believe that, in consequence, there is no ethanol production now, which relies on cane molasses and cassava. The good news, for next season’s harvest, is that benzene will no longer be sold from October this year (based on my memory of a newspaper report a few weeks ago) so ethanol production will, once again, support the price of cassava by the end of this year.

Rgds
Khonwan