Does the Village Fund Matter in Thailand?

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 $22,500) to every village and
urban community in Thailand as working capital for
locally-run rotating credit associations. The money 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 $8
billion, with an average loan of $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.