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Bank for Agriculture and Agricultural Cooperatives (BAAC), Thailand (Case Study)
... In fact, Tapscott et al. [8] estimated that nearly two billion people worldwide still do not have access to basic banking services. Despite the paramount importance of online banking for economic growth, little has been done to deliver banking services to connectivityrestricted environments, due to the inability to meet the security requirements locally without connecting to the centrally controlled databases [9], [10]. ...
... To reduce the service cost and enable payments that involve very small sums of money, a number of micro-payment schemes were proposed. Some of them leverage SMS or USSD of the cellular networks, for instance, the Bank for Agriculture and Agricultural Co-operatives (BAAC) in Thailand [9] and the M-Pesa Service in Kenya [10]. However, SMS messages are easily spoofable and hence require additional user verifications for security, and USSD could be affected by session time-outs. ...
... blockchain using the Python-JSON RPC library. 9 It keeps track of the connectivity and update the account balances in SQLite database. We have also developed a smart contract in Solidity v0.4.12 for token creation, conversion and transfer (cf. ...
Digital banking as an essential service can be hard to access in remote, rural regions where the network connectivity is unavailable or intermittent. Payment operators like Visa and Mastercard often face difficulties reaching these remote, rural areas. Although micro-banking has been made possible by Short Message Service (SMS) or Unstructured Supplementary Service Data (USSD) messages in some places, their security flaws and session-based nature prevent them from a wider adoption. Global-level cryptocurrencies enable low-cost, secure and pervasive money transferring among distributed peers, but are still limited in their ability to reach people in remote communities.
We propose a blockchain-based digital payment scheme that can deliver reliable services on top of unreliable networks in remote regions. We focus on a scenario where a community-run base station provides reliable local network connectivity while intermittently connects to the broader Internet. We take advantage of the distributed verification guarantees of Blockchain technology for financial transaction verification and
leverage smart contracts for secure service management. In the proposed system, payment operators deploy multiple proxy nodes that are intermittently connected to remote communities where local blockchain networks, such as Ethereum are composed of miners, vendors and regular users. Through probabilistic modelling, we devise design parameters for the blockchain network to realise robust operation over the top of unreliable network. Furthermore, we show that transaction processing time will not be significantly impacted due to network unreliability through extensive emulations on a private Ethereum network. Finally, we demonstrate the practical feasibility of the proposed system by developing NFC (Near Field Communication) enabled payment gateways on Raspberry-Pis, a mobile wallet application and mining nodes on off-the-shelf computers.
... For example, primitive banking services have been made possible via Short Message Service (SMS) or Unstructured Supplementary Service Data (USSD) of cellular networks. This is exemplified by the BAAC in Thailand [11] and M-Pesa in Kenya and Tanzania [21]. The emergence of having interconnectivity within a given area, e.g., a village, with intermittent access to the main operator network, as well as decentralised services such as cryptocurrencies that do not require centralized control [19], [20], has opened up possibilities for delivering improved banking services to connectivity-restricted areas. ...
... 1) The (non)Impact of Network Delays: In order to understand the stability of our proposal when inter-node delay increases, we introduced various delays including 0, 10 ms, 50 ms, 100 ms, 500 ms, 1000 ms per connectivity channel. 11 Figure 5a shows the 50th, 70th, 90th, 95th, 99th percentiles of block time, from which we can see block time stays stable even with delays reaching 1 second. We ascribe this to PoW difficulty adjustment where network delay causes time difference between two adjacent blocks to increase, the internal algorithm reduces difficulty level to achieve a shorter block time. ...
... ii) Micro-Payment Systems: A number of micro-payment schemes were proposed in the mid-to-late 1990s. Some of them leverage SMS or USSD of the cellular networks, for instance, the BAAC in Thailand [11] and the M-Pesa Service in Kenya [21]. However, SMS messages are easily spoofable and hence require additional user verifications for security, and USSD could be affected by session time-outs. ...
Banking as an essential service can be hard to access in remote, rural regions where the network connectivity is intermittent. Although micro-banking has been made possible by SMS or USSD messages in some places, their security flaws and session-based nature prevent them from a wider adoption. Global level cryptocurrencies enable low-cost, secure and pervasive money transferring among distributed peers, but are still limited in their ability to reach more people in remote communities. We proposed to take advantage of the delay-tolerant nature of blockchains to deliver banking services to remote communities that only connect to the broader Internet intermittently. Using a base station that offers connectivity within the local area, regular transaction processing is solely handled by blockchain miners. The bank only joins to process currency exchange requests, reward miners and track user balances when the connection is available. By distributing the verification and storage tasks among peers, our system design saves on the overall deployment and operational costs without sacrificing the reliability and trustwor- thiness. Through theoretical and empirical analysis, we provided insights to system design, tested its robustness against network disturbances, and demonstrated the feasibility of implementation on off-the-shelf computers and mobile devices.
... Credit is provided at reasonable interest rates, with more reliable customers receiving the lowest interest rates and best terms. The BAAC is often seen as one of the few examples worldwide of a successful state-owned specialized financial institution (Fitchett 1999;Maurer, Khadka, and Seibel 2000), although debt remains a challenge for many small-and large-scale farmers as we describe below. Thailand thus offers a unique contrast to many contemporary credit systems for rural development, which rely on private and commercial institutions to extend credit to farmers (see Bateman 2022). ...
This article compares rural credit systems in Thailand and Cambodia in order to advance studies on financialization and rural development in South East Asia. In Thailand, the state remains a large provider of credit to farmers. In Cambodia, most farmers access credit from a globalized, private microfinance industry. Based on qualitative research carried out in 2021 and 2022, we argue that farmer debt has led to divergent outcomes in Thailand and Cambodia due to their opposing systems of rural credit developed over the past half-century. These systems were forged within historically specific conjunctures of international development policies, state–capital relations and domestic politics of debt. Consequently, Thailand’s farmers access credit from the state at significantly lower costs and with more support in various forms. Over-indebtedness is a problem for some farmers, but not because state-controlled financial institutions charge excessive interest rates. In contrast, the cost of private credit is higher in Cambodia, with many farmers facing overindebtedness with little to no support from the government. This article contributes to scholarship on financialization within South East Asia by demonstrating how the legacies and geopolitics of development, alongside the contentious politics of farmer debt, together shape the outcomes of rural credit systems.
... The only possibilities have been to leverage the short message service (SMS) or Unstructured Supplementary Service Data (USSD) of cellular networks. This is exemplified by the BAAC in Thailand [3] and the mBank in the Philippines [1]. However, a lack of proper encryption on SMS messages makes them insecure and hence require additional verifications that inevitably cause more burden for the customers, while USSD is session-based and does not enable local storage so users can only access their account information within certain sessions. ...
Cash-less payment via a variety of credit, debit or prepaid cards is pervasive in our inter-connected society, but not so ubiquitous in remote rural regions where network connectivity is intermittent. We proposed a cash-less payment scheme for remote villages based on blockchains that allows to maintain a record of verifiable transactions in a distributed manner. We overcome the limitations of intermittent network connectivity by solely relying on blockchain mining nodes in the village for transaction processing and verification. The bank joins as a peer and monitors node behaviors, rewards miners and processes currency exchanges whenever the connectivity is available. We take advantage of the Ethereum network to develop our solution and demonstrate the feasibility of the proposed system on off-the-self computing devices. We emulate a remote village scenario with intermittent network connectivity and show the robustness and reliability of the proposed system.
... Even without the VF, Thai households have considerable access to credit. In a 1997 survey of 1875 households in 192 villages in four provinces in central and northeastern Thailand, Kaboski and Townsend (2005) found that loans from the Bank for Agriculture and Agricultural Cooperatives (BAAC) -widely considered to be a successful rural finance institution (Fitchett, 1999;Yaron, 1992) -were available in 87% of the villages; furthermore, three-fifths of villages had at least one local financial institution (such as a rice bank or women's lending group). Using data from 1575 households in three provinces in northeastern Thailand, surveyed in 2007, Kislat and Menkhoff (2012 report that the main sources of village credit, as measured by the volume of lending, were the BAAC (40%), the Village Fund (24%), credit and savings groups and local cooperatives (17%), money lenders (7%), relatives (6%), and other sources, including commercial banks and policy funds (6%). 1 However, credit markets have well-known informational asymmetries that in turn can lead to the inefficient allocation of credit, excessive loan default, monopoly profits for well-informed lenders, and even credit market collapse (Bardhan & Udry, 1999, p. 91). ...
Launched in 2001, the Thailand Village and Urban Community Fund (VF) provided almost US$2 billion – a million baht for each of Thailand's 78,000 villages and wards – to provide working capital for locally-run rotating credit associations. Using data from the Thailand Socioeconomic Surveys of 2002 and 2004, we find that VF borrowers were disproportionately poor and agricultural. A fixed effects model using a panel of rural households for these years finds that VF borrowing is associated with, on average, 3.5% more current spending, and 1.4% more income; very similar impacts are found using a propensity score matching model applied to nationwide data in 2004, which also found that VF loans are associated with the acquisition of more durable goods. By way of contrast, borrowing from the Bank for Agriculture and Agricultural Cooperatives appears to have a stronger effect on income than on expenditures. The evidence also shows that the effect on expenditure (or income) of VF borrowing is strongest at the lower quantiles, and flowed disproportionately to low-income households; in both of these senses it is “pro-poor”.
... Previously, the main source of formal credits for small-and medium-scale farmers was the BAAC or more formally known as the Bank of Agriculture and Agricultural Cooperatives (Fitchett, 1999). The Thai government has majority ownership in the bank. ...
... For many borrowers, VF loans are just one source of credit; a third of VF borrowers also borrow from the Bank for Agriculture and Agricultural Cooperatives (BAAC), a more traditional agricultural development bank that extends relatively large loans, mainly to farmers, at comparatively low interest rates, and is sometimes held up as a model of a successful rural financial institution (Fitchett 1999). ...
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 withoutnew 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.
This article explores the challenges and opportunities faced by the Bank for Agriculture and Agricultural Cooperatives (BAAC) in Thailand from a microfinance perspective. It examines the role of BAAC as a specialized financial institution in assisting underprivileged households and small businesses in accessing financial services. The study highlights the political exploitation of BAAC for populist strategies and the negative impact of corruption on the effectiveness of its operations. Additionally, it discusses the rice-pledging policy in Thailand, which was driven by political motivations and resulted in significant losses for the government. The article emphasizes the need for sustainable development strategies and decreased political interference to enhance the performance of BAAC and effectively support farmers and the poor in Thailand.
p> This research purpose is to find an alternative business model that can be implemented by Islamic bank in Indonesia, hence the Islamic bank can optimally growth. This research conducts several stages of research. Indepth interviews were conducted to get an idea of the need for a new Islamic Bank business model. The results of the interview are used as the basis for designing the business model of the Islamic Bank using the Analytic Network Process (ANP) method framework and the questionnaire model to obtain the required data. Based on the interview results, there are 4 (four) alternative islamic banking business models, namely Islamic Commercial Bank, Islamic Commercial Bank with Backed Asset, Integration of Islamic Commercial Bank and Islamic Social Bank, and Waqf Bank. The results of this study indicate that the Wakaf Bank Business Model (25.42%) is the main priority of the respondents in the islamic commercial bank business model.
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The Thailand village fund (VF) is the second-largest microcredit scheme in the world. Nearly 80 000 elected local VF committees administer loans that reach 30 percent of all households. The value of VF 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 over 3000 local VFs conducted in 2010, we evaluate the performance of the VF. As expected, profit rates are hard to model, but our regression analysis shows that loan recovery rates, total lending and the proportion of loans going to the poor are all higher when a VF borrows additional funds from a formal bank and on-lends to households, as done by one in five VFs. An economic analysis suggests, tentatively, that VF benefits exceed the costs. A financial analysis shows that VFs more than break even, with receipts covering their cash costs. Most VFs are social rather than financial intermediaries; they have little incentive to take risks or to innovate, which explains why VF lending has not kept pace with the growth of the Thai economy.
This review examines portions of the vast literature on rural financial markets and household behavior in the face of risk and uncertainty and limited commitment. In addition to examining household strategies and bilateral contracting we place particular emphasis on studying the important role of financial intermediaries, competition and regulation in shaping the changing structure and organization of rural markets. Our goal is to provide a framework within which the evolution of financial intermediation in rural economies can be understood.
This paper evaluates the impact of the Thailand Village and Urban Revolving Fund on household expenditure, income, and assets. The revolving fund was launched in 2001 when the Government of Thailand promised to provide a million baht (about 2 billion in total – was quickly disbursed to locally-run committees in almost all of Thailand’s 74,000 villages and more than 4,500 urban (including military) communities. By May 2005, the committees had lent a total of about 466. Using data from the Thailand Socioeconomic Surveys of 2002 and 2004, each of which surveys almost 35,000 households, the authors find that the borrowers were disproportionately poor and agricultural. A propensity score matching model finds that Fund borrowing in 2004 was associated with, on average, 1.9 percent more income, 3.3 percent more expenditure, and about 5 percent more ownership of durable goods. These results are broadly consistent with the results from instrumental variables models (where the identifying instrument was the inverse of village size), which however show a smaller (marginal) effect. Households that borrowed both from the revolving fund and from the Bank of Agriculture and Agricultural Cooperatives gained substantially more in terms of higher income than those who borrowed from either one or the other or from neither.
The provision of affordable financial services to the rural population has been a prime component of development strategy for several decades. Governments, development agencies, and other donors have supported various rural financial institutions, with the aim of accelerating growth and reducing poverty. In recent years it has become clear that the promotion of rural financial markets should be done in the overall context of rural development and integrated financial markets. This approach implies an important, market-friendly role for governments in creating an environment conducive to the development of rural financial markets. This volume is offered as a sourcebook for decisionmakers seeking to create such an environment. It first outlines the traditional approach to rural finance, which relied heavily on supply-led, state owned agricultural credit institutions. Next, it presents the emerging new approach and proposes a framework for determining the most appropriate role for governments, identifying the most effective sequencing of policy reforms, and selecting the most suitable forms of intervention. On the institutional level the report presents a framework for assessing the performance of rural finance institutions and suggests guidelines for the development and effective management of these institutions. Finally, the volume reviews and analyzes the performance of three successful rural finance institutions. These three case studies provide valuable insights for the design of future interventions.
Providing affordable credit to the rural population has long been a prime component of development strategy. Governments and
donors have sponsored and supported supply-led rural finance institutions both to improve growth and equity and to neutralize
or mitigate urban-biased macroeconomic policies. But because of high risks, heavy transaction costs, and mounting loan losses,
many of the programs have drained state resources to little purpose, reaching only a small part of the rural population and
making little progress toward self-sustainability.
There are, however, a few success stories. This article reviews the policies, modes of operation, incentives, and financial
performance of four publicly sponsored programs in Asia that are widely perceived to be successful, to find out what economic,
social, and institutional factors contributed to their success.
Tourism has been, and still is, a very profitable industry in Spain. But the Spanish model of tourism development, following a pattern set in the 1950s, is now in crisis. The crisis is apparent in the widespread overdevelopment of tourist resorts and residential facilities in coastal areas, generating high environmental, social and economic costs. In this paper, we describe the Spanish model of tourism, the results it has achieved, the reasons for its longevity and the obstacles facing any attempt to change it. Given the failure of individual, collective and political action to solve the problems ofoverdevelopment, we ask whether corporate social responsibility and its theoretical foundations and instruments offer a solution.
Joint liability and other nontraditional techniques have been adopted by four of the most prosperous Asian RFIs: the Bank for Agriculture and Agricultural Cooperatives (BAAC) in Thailand, the Grameen Bank in Bangladesh, and the Badan Kredit Kecamatan and the Bank Rakyat Indonesia Unit Desa in Indonesia. Like all RFIs, these four were originally established in developing countries to promote growth in low-income rural sectors by providing local farmers with affordable credit. While other RFIs have foundered, seemingly unable to meet their goals of servicing the rural poor, these institutions are well on their way to becoming self-sustaining, full-service "banks' for rural populations. -from Author
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