Rapid Assessment for Resilient Recovery and ... - GFDRR

are the main borrowers of these two institutions. Based on meetings with these two banks,
additional NPLs due to floods are estimated at around 5 percent of the total portfolio. This
ratio was applied for the overall portfolio of SFIs, with one exception – it was important
to distinguish between one SFI, which could demonstrate the basis for its low forecasted
increase in NPLs 52 , and the others.
For the proportion of NPLs that are total losses, and for average interest rates, the assumptions
used were the same as for commercial banks. The only difference is in average
duration of the delinquency, where calculations used the same three months for the SFI
with the lower risk profile, but six months for the others, as their clients were more likely
to have lost revenue generating ability for a longer period, and/or lost value of their real
estate such that repayment ability was lowered.
The estimated losses for SFIs thus amounted to THB 67.2 billion.
Microfinance Institutions
For village funds and cooperatives, there was too little information to assess damage.
Data was gathered from 17 Village Funds, all of which reported damage to their physical
assets equaling 2 percent of their assets. It is hard to determine how representative this
sample is; however, there is no reason to think that damage to these financial institutions
is unbearably high.
Despite being outside the focus of the banking sector, microfinance is far larger than all
other non-bank finance institutions combined (insurance aside). The largest player in microfinance
in Thailand is the much-maligned cooperative sector. According to the Cooperative
Promotion Agency, the total portfolio of the cooperative sector is THB 759 billion.
To assess the losses to cooperatives, the Cooperative Savings Bank is treated separately
from the rest of the cooperative sector. As the Cooperative Savings Bank has a different
risk profile, given it is more focused on (usually salary-linked) consumer/individual lending,
it was assumed that the increase in its NPL ratio would be only 0.05 percent, the same
assumption as for the large SFI that has a similar portfolio. For the rest of the cooperative
sector, a 10 percent increase in NPLs was assumed, i.e. double the rate for SFIs. This is
based on the fact that cooperatives are not regulated and do not tend to follow-up on late
loans like banks do. The assumed interest rate for this sector is 15 percent. The resulting
estimated losses for the cooperative sector come to THB 7.6 billion.
The village fund sector is also significant. There are around 80,000 village funds in the
country (including the 3,528 urban funds (UFs) and the 738 military funds (MFs)), with total
assets of around THB 170 billion. Their total portfolio is estimated at THB 136 billion (it is
noted, however, that the National Village Fund does not have precise figures, as reporting
is incomplete). To be consistent with the cooperative sub-sector, using the nationwide
portfolio as a base, a 10 percent increase in NPL ratio due to the effect of the floods is
assumed, and the stated average interest rate of 15 percent was used. Losses for village
funds (and other funds) are estimated at THB 8.2 billion.
52 We used an assumed additional NPL ratio of 0.05 percent, in line with commercial banks, even though the management
of this SFI was arguing quite convincingly that it could be closer to 0.02 percent.
62 THAI FLOOD 2011 RAPID ASSESSMENT FOR RESILIENT RECOVERY AND RECONSTRUCTION PLANNING