Poverty, income inequality, and microfinance in Thailand

The purpose of this paper is to provide an assessment of recent developments in poverty and income inequality in Thailand, summarising the government’s programs to address it, and highlighting the importance of microfinance sector as a key priority.

The author clarifies that despite Thailand having been very successful in lowering the national incidence of poverty, significant pockets of subnational poverty remain. Moreover, income inequality in Thailand is among the highest in Southeast Asia.

Findings are that:

• differences in regional per capita incomes are the key determinant of poverty and inter-regional income inequality in Thailand
• this suggests that government interventions to address inequality should be a combination of economy-wide, region-specific, and sector-specific initiatives

The document figures that while government programs have expanded microcredit, low-income families still have limited access to financial services.

Conclusions are as follows:

• it will be important for the government strategy for financial inclusion to include time-bound measures to open the microfinance sector to greater private sector participation
• the strategy should also include measures to develop an appropriate regulatory framework to promote the growth of micro-insurance products
• the government should develop a national financial literacy program aimed at low-income households
• the government should establish a national social protection commission with a mandate to oversee the review of poverty reduction programs
• the government should examine the feasibility of introducing the programs on conditional cash transfer (CCT) in the poorer regions
• the government should carry out further analytical research on labour market informality in the poorer regions, to better understand youth labour market experience and poverty