TDRI warns small Pico Finance businesses at risk as loan rules are relaxed

Since its introduction in 2017, the sector has seen rapid growth, with total loan issuance reaching 50 billion baht

The Finance Ministry has announced revisions to the regulations governing the hire purchase and leasing industry, particularly in the Pico Finance sector. These changes will allow Pico Finance businesses to extend loans across provinces, aiming to expand service accessibility and address liquidity issues faced by operators.

Currently, Pico Finance serves as a vital tool for providing credit to small borrowers at the local level, with the Finance Ministry issuing licenses and overseeing the regulation of this sector. Since its introduction in 2017, the sector has seen rapid growth, with total loan issuance reaching 50 billion baht and outstanding loans around 7 billion baht.

However, due to the ongoing economic slowdown and rising household debt, many businesses in the sector are facing challenges with loan repayment. Reports indicate that over 100 licensed businesses have voluntarily returned their licenses to the Ministry.Paopoom Rojanasakul, the Deputy Finance Minister, stated that he had received reports of numerous Non-Performing Loans (NPLs) in the Pico Finance sector, with several businesses gradually returning their licenses. It has been verified that, over time, there have been both new license applications and license returns, with the overall number of new registrants being higher.

From 2017 to June 2025, there have been a total of 1,414 new Pico Finance licenses issued, with 106 licenses returned.

Looking at the annual data, in 2023, 47 new licenses were issued, with 18 license returns, and in 2024, 40 new licenses were issued, with 22 license returns.

As of March 2025, a total of 5,081,240 Pico Finance loans were approved for retail consumers, totaling 50.06 billion baht, with an outstanding loan balance of 393,010 accounts, amounting to 7.42 billion baht.

In response, the Ministry is reviewing and adjusting the regulations to allow for more flexibility in loan distribution and to help operators facing liquidity problems, Paopoom said. 



 

Nonarit Bisonyabut, Senior Research Fellow at the Thailand Development Research Institute (TDRI), warned that while many larger operators have supported the Ministry's regulations, smaller businesses may struggle if they do not adapt to the new guidelines. Some smaller businesses may choose to exit the market if they find compliance with stricter regulations unfeasible.

Nonarit pointed out that the move to allow inter-provincial lending might transform the market structure. While it could help businesses expand, it might also lead to the consolidation of the Pico Finance industry, with smaller businesses being forced out.

He explained that allowing Pico Finance businesses to operate across provincial boundaries could lead to increased competition and force smaller companies to merge with larger ones to survive. However, he also mentioned that expanding the service area may not necessarily reduce risks, as the issues faced by these businesses tend to be similar across regions, driven by external economic factors.

Nonarit urged the Finance Ministry to explore other ways to support Pico Finance operators, such as developing big data systems to improve lending practices and updating laws to enhance debt collection processes. This will help encourage businesses to continue operating effectively, he said.

(2025/06/13-00:00)