Online lending is nothing new among Thai consumers. Nowadays, borrowing money online can be as simple as downloading an application. Due to its convenience and ease of access, digital lending has come to prominence over the last decades alongside
. Seeing the importance of hi-tech integration in financial services, the government keeps pace with the development of regulations and promotes products that help leverage it. Notably, in recent years, purchasing goods and services through QR code scans and/or with e-wallets has become a common practice among the public. With Fintech in place, multiple online platforms, both banks and non-banks, offer loans to serve individuals and businesses with limited access to traditional banking services. The popularity of these platforms led to increased
. Among
, personal loans accounted for the second-highest growth rate. However, all that glitters is not gold. Many Thais have fallen victim to digital lending scams, especially during the COVID-19 pandemic.
Digital lending regulations in Thailand
The rise in popularity of digital lending in Thailand stemmed from the economic repercussions of the COVID-19 pandemic. Many families felt the pinch and took out loans. Some turned to
non-bank lenders, both offline and online, as the loans could be attained more easily and rapidly than from traditional banks. Most legal non-financial service providers in Thailand are limited companies registered with the Ministry of Commerce. In 2019, the Bank of Thailand (BOT) introduced regulations surrounding
crowdlending or peer-to-peer (P2P) lending platforms and other digital lending services to ensure consumer protection, prevent money laundering, and promote fair competition. Hence, licensing and compliance requirements are in place for digital lenders. The BOT defined
digital personal loans as loans under supervision in which lenders employ tech in the service processes and alternative data such as utility bills and phone bills to evaluate the applicants. The maximum line of credit is 40,000 Thai baht per person with a one-year
repayment term per agreement. The purpose of lending can be unspecified, and the maximum interest rate is up to 25 percent per annum. On the other hand,
Nano Finance requires the use purpose to be work-related, while P Loan or
personal loans under supervision function similarly to digital personal loans but with different conditions.
Obstacles and future of digital lending in Thailand
The future of digital lending in Thailand is expected to be positive given the country's increasing digital adoption, regulatory support, and the convenience offered by online lending platforms. Digital lending reduces the costs of access, transaction, verification, and monitoring. This also helps promote
Thai MSMEs financial access. However, challenges such as maintaining consumer protection, data security, and managing potential risks will also shape the industry's trajectory. The recent increase in
household debt in Thailand, of which approximately one percent was made up of
non-performing loans, may seem irrelevant. However, it contributed to the household’s fragility, which can affect the overall financial and economic system in the long run. Therefore, despite its insignificant portion in household debt, digital lending’s accessible nature could threaten the financial well-being of economically weak and financially illiterate people, leading them to over-indebtedness from
outstanding personal loans.
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