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Country case studies: Thailand

4 Impact of decentralization on local level rural development in Thailand, Ms Montip Krachangvej,Thailand
5 Thailand cooperatives role in decentralized rural development for poverty alleviation and food security at the community level, Asanee Ratanamalai, Ph.D, Thailand
6 An alternative approach to development: A case study of the Bangchak petrol stations, Dr Supriya Kuandachakupt, Thailand
7 Decentralized rural development and the role of self help organizations in Nang Rong, Buriram, Wilas Lohitkul, Thailand
8 Roles of agricultural cooperatives and village credit unions in rural financial markets in Thailand, Paradorn Preedasak; Viroj NaRanong, Thailand
9 Decentralized rural development and the role of self help organizations, Mrs Wannee Ratanawaraha, Thailand

4 Impact of decentralization on local level rural development in Thailand, Ms Montip Krachangvej[1],Thailand

In most countries of the Asia and Pacific region, the highly centralized planning approaches of the 1950s have failed. Past development is seen to have over-emphasized economic growth. Government administration and planning systems for rural development were centrally planned, top-down, and otherwise unsatisfactory "development from above" strategies. Planners and policy makers were inspired to devise a decentralization process and create new organizations at central and local levels to reduce economic disparities between regions, to involve resources and administrative capacity of local governments in that process and to encourage people's participation in their own development.

The Eighth National Economic and Social Development Plan

Past development results: successes and problems

Since the First National Economic and Social Development Plan began in 1961, emphasis has been on economic development. Natural resources and human capital expanded the production base, employment opportunities and national income. These guidelines were appropriate for and consistent with the country's situation in the early period of national development because of abundant natural resources and an excess labour supply, especially in the agricultural sector. Thailand's production and exports, therefore, were attributed largely to these comparative advantages.

National development through this policy had proven successful during the previous three decades: the economy registered a healthy annual growth rate of about seven percent, with over 28 times increased per capita income. The mid-plan review of the Seventh Plan (1992-1996), the economy grew 8.2 percent on average, on target. Per capita income rose to 60 000 Baht (about US$2 400) in 1994. Fiscal stability was evident, alleviating chronic problems of income distribution and upgrading the quality of life at a certain level. The proportion of the poor in total population dropped from 26.3 to 13.7 percent from 1996 to 1992. Because Thailand has achieved an annual per capita income higher than US$1 500, the World Bank no longer classifies it as a poor country.

Despite remarkable success in economic development, Thailand faces growing problems in terms of social and environment degradation, reducing the quality of life: 1) Persistent income disparities Income in the top 20 percent of households continues to rise, while the bottom 20 percent is still falling, widening the gap between the groups. By region, income in the Northeast was 10 times lower than in Bangkok in 1991; 2) Deterioration of natural resources and environment Rapid economic growth was achieved at environmental expense. In 1992-1993, 160 000 ha of forest were exploited annually, with only 25 000 ha of reforestation; 30 million ha was subject to salinity while 17 million ha faced erosion. Predictably, water quality is poorest in the lower Chao Praya River from Bangkok and downriver. Congested urban-sprawl communities and insufficient basic services aggravate air and noise pollution in Bangkok and major cities, where airborne dust continues to increase; 3) Society is more complex and materialistic: ethical and moral problems, reduced social discipline and compliance with law reflect a Thai economy which has become more internationalized and materialistic. People now face problems of adjusting to new ways of life and the values of modern society. Seeking wealth and prosperity have not assimilated with conventional Thai values, which stress self-sufficiency and compassion. Amid economic difficulty and lower population growth, families are becoming smaller in both rural and urban areas, while weakened family ties have increased problems associated with youth and social life; 4) Average life expectancy has greatly improved with health service expansion and progress in medical services. Illness is increasingly moving from infectious diseases to modern diseases with more complex conditions, such as accidents, cancer, heart disease, AIDS and illness from social stress. These are now major causes of death and likely to rise in the future, due to emotional, pollution and urban congestion factors attributed to economic development; and 5) Investment-savings gap and overreliance on foreign technology and capital goods: Stronger economic stability did not offset the widening investment-savings gap. In 1993, the gap rose to 5.6 percent of GDP, compared to a target of only 2.5 percent in the last year of the Seventh Plan, while Thailand relied more heavily on foreign technology and capital goods. The import value of capital goods reached a high of 430 000 million Baht ($17 200 million) in 1994, against 330 000 million Baht ($13 200 million) in 1991. Such problems hinder attatining sustainable development.

Causes of problems

Some problems are due to planning focusing on income generation, regardless of the cost to natural resources, the environment and society. Human resources were seen as production inputs serving the labour market; less attention was given to human potential, intellectual capability and local ways of life. Emphasis was on foreign technology transfer, rather than research and development (R&D) to upgrade existing wisdom. Budgeted annual R&D in 1992-1996 was only 5 000 million baht (0.14 percent of GDP) against a targeted R&D budget of 17 500 million baht (0.5 percent of GDP).

Education is highly centralized and formal, with weak teaching methods and a lack of continuity. Teachers practice one-way communication and don't teach logical thinking. Opportunitites in non-formal education are available for those with higher income, but rural residents lack opportunities for continuing education. Education on offer is inconsistent with rural needs and does not train appropriately for community development. Society is compartmentalized and social conflicts arise because people only see their own problems.

Public administration contains high level "disintegration of responsibility" structures, with multiple agencies unable to coordinate effective problem solving. No mechanism deals responsibly to address social problems in a timely manner. Public sector planning and decision-making processes are highly centralized and unresponsive to local communities; requests of rural people are often dismissed simply as being "political" movements without authenticity. The existing political system has not kept pace with development in other sectors. Former national development plans did not recognize the significance and interrelationships of politics, administration and the bureaucratic system.

Generating ideas to guide the NESDB Eighth Plan

To generate national development guideline ideas and recommendations for the Eighth Plan, an unusual planning opportunity was organized in 1998, a think tank seminar, "Generating ideas for the Eighth Plan" at Marukhataiyawan Palace in Petchaburi. It joined academics, philosophers, mass media and NGOs who reflected on Thailand's future: envisioning a self-sufficient, free, just, merciful, compassionate society respecting human rights; in which people are happy, family-centred and have a strong sense of community. They are knowledgeable, self-actualizing and responsive to global changes; live in peace and stability; reflecting balanced development of economy, society and the environment. Participants viewed national development as emphasizing "the person", to ensure that all people develop their best potential. Persons in all walks of life should help national development and participate with dignity and responsibility for society and the environment. Development should be based on national identity as Thai enjoying Thai culture. Economic and industrial development should not be ignored, but development should contribute to happiness, while maintaining a globally competitive capacity. Popular thinking should become holistic rather than compartmentalized.

To implement development consistent with the above objectives involves economic, social and environmental areas and cooperation of public and private sectors, including POs. Government cannot be the sole actor as it will require more human resources and budget, inconsistent with its policy to downsize bureaucracy.

Development priorities are, First, clear incentives to encourage private sector participation in national development; Second, clear methodologies for government service reforms: decision-making authority should be delegated to local government agencies. Third, understanding among relevant parties should be achieved to initiate the transition from a "top-down" to a "bottom-up" planning in development and administration: to decentralize planning and decision-making authority to regional, local and community levels; to promote cooperation among government agencies, private organizations, business, academic experts, professional organizations and the press. This includes encouraging thinking and networking to promote development planning in line with the problems and potentials of each region, mainly to fit local needs. The process should uphold popular participation and bottom-up planning.

Consistency between development strategies and concepts for sectoral planning

These recommendations, guidelines and strategies are consistent with policies and guidelines of relevant public and private agencies. There are many changes underway: Teacher education - The National Education Commission is revising teacher education guidelines and is drafting new programmes for future teachers, new teaching/learning and faculty development; Decentralized education administration - A Ministry of Education Administrative Decentralization of Education bill encourages popular participation in local education; Promoting private sector participation in education - The Ministry of Finance proposed US$500 million in loan funds to the private sector for new schools and scholarship funds at all levels; Strengthening the family - A new institution will train child and family development specialists for existing projects of the Department of Community Development, the Ministry of Interior and other agencies to strengthen family capacity in raising children; the prime minister's programme for women's development for more potential, opportunity, quality of life and participation in national development; and the National Rural Development and Decentralization Committee emphasized human resources development for higher capacity and quality of life. Also, the Thai Farmer's Bank project, Thailand's Education in the Globalization Era, proposes new strategies for a strong community, peaceful society and sustainable environment.

The system of decentralization

Decentralization of the rural poor can be seen as "process", popular participation in decision-making, implementation and monitoring-and-evaluation. This is related to changes in attitudes and values among the people, bureaucracy and public organizations to better adapt to changes in the environment, and to the demands placed upon them. Tambon (subdistrict) councils and Tambon Authority Organizations (TAO) are the primary vehicles of decentralization. In 1956 councils were ordered by the Ministry of Interior with two elected members from each village and chaired by the district chief; committees were formed at subdistrict and village levels. In 1957, a Tambon Council Act established Tambon Administrative Organizations (TAO) and defined committee functions. The council has elected members from each village; village heads are members by position. The committee comprises the tambon chief (kamnan as chair), the medical officer, village chief, schoolmaster or any educated person, not exceeding five members, appointed by the district chief. In 1972, however, a military decree established elections for some members, but removed decision-making authority, thus relegating councils to advisory status.

The Tambon Council and Tambon Authority Organization Act (1994) empowered subdistrict councils comprising tambon chief or kamnan, all village chiefs, the medical officer and members elected from each village. Councils not needing government financial aid for three years may be elevated to TAO status, becoming a local government unit with two committees: a Tambon Authority Organization Council Committee (TAOCC), i.e. the kamnan, village chiefs, a medical officer and two representatives from each village and a Tambon Authority Organization Administration Committee (TAOAC) or executive committee not exceeding seven members: the kamnan, two village chiefs and four elected members. Tambon councils comprise appointed and elected members. Appointees are the kamnan, village chiefs and a medical officer, while representatives and a council secretary are elected.

Tambon-level organizations

The TAO includes the Tambon Authority Organization Council (TAOC, a legislative body) and the TAO Administrative Committee (TAOAC). The council has appointees, i.e. the kamnan or tambon chief, all village chiefs of the tambon, and a tambon medical officer, and elected members (two representatives from each village with four-year terms). The TAOC and the TAOAC is the core of local administration. The latter comprises the council chair and vice-chair and a secretary elected for four years. The TAOC approves and regulates a development plan; considers and approves subdistrict regulations and orders, establishes an annual budget, regulates expenses and monitors TAOAC performance, appointed by the district chief to include the kamnan, two village chiefs and four members of the TAOC. The TAOAC administers TAO business and local development plan, conducts TAO business with the TAO council; report all activities and allocate TAO annual budget to the TAOC at least twice a year; prepares the tambon development plan, annual budget, and report to the TAOC; performs tasks assigned by government; support and organize agriculture and cooperative mobilization; promote cottage industries; promote local employment; protect, maintain, and preserve state property; provide markets, ferry crossings and piers; support local business development.

Authority of tambon authority organization council (TAOC)

The TAOC is responsible for subdistrict economic, social and cultural development. It provides and maintains water and land transport, such as roads, public parks as well as garbage and sewage services. Services as diverse as public health, education, disaster response, culture and religion; development of women, children, youths, older and disabled persons; protecttion and preservation of natural resources and natural surroundings are its responsibility. It fulfills other tasks as assigned by higher levels of government. The TAOC must also provide water for domestic and farm use; electricity and lighting systems; maintain irrigation systems; and provide and maintain meeting places, sports and recreational facilities, and parks.

The TAO and other government units and oganizations: TAO as initiator

The TAO is a local government organ and is an initiator conducting business in conformity with other laws, such as the Civil Disaster Act: it must act to prevent and provide relief in event of natural disaster. Similarly, the protection and preservation of natural surroundings must conform to the Natural Resources Act. Before doing any activity, the TAO must consult the tambon, district or provincial development plans. If other government agencies have projects or activities within the TAO, the tambon development plan must be referred to. A well-organized and coordinated plan ensures effectiveness and avoids unnecessary loss of budget. It must function only within its own boundary. If it is necessary to act outside of its boundaries, the TAO must work in conjunction with the tambon council, TAO, the provincial administrative organization (PAO), and/or othert concerned government agencies. Such activities must be approved byconcerned agencies and administrative bodies. A TAO may temporarily call personnel from any government agencies and state enterprises. If an officer or employee falls under jurisdiction of the provincial governor, the governor may directly approve the transfer. If the requested officer is not within provincial authority, the request must be forwarded to the ministry to which the requested officer belongs. When a TAO achieves the perfornmance level of a municipality, it may be raised by Royal Decree to become a municipality. In such case the upgraded TAO will lose its TAO status.

The TAO in operation

The provincial governor and district chief monitor the TAO to provide checks and balances as a duty delegated by the central government. All TAO members are subject to the Local Administration Act (1914). The district chief is responsible for conducting free and fair elections, receives TAO council member resignations, appoints TAO chairman and vice-chairman (with consent of the TAO council), summons the TAO council when there is no appointed chair or the chair has not convened the meeting, and calls emergency meetings when the TAO chair, the TAO administrative chair or TAO members request it as necessary. The district chief appoints a TAO administrative committee.

The governor permits transfer of any government officer at TAO request. If the officer is not subject to the governor's jurisdiction, the governor forwards the request to the concerned ministry. The governor and district chief are a check and balance to the TAO council, to ensure its compliance with law. The TAO may promote local development; its success requires effective administration. It may be concerned with development planning, administrative committee performance, council meetings, personnel management and TAO regulations preparation.

TAO development planning

The TAO has its own budget. According to the TAO and TC Act 1994 it is necessary to have a TAO Administrative Committee responsible for development planning in accordance with national, provincial, district and city plans. The TAO has five-year and annual plans: The five-year plan guides policy, work and development projects in conjunction with the district social and economic development plan and the national development plan. The socio-economic development plan is in conjunction with annual district, provincial and tambon development plans. The TAO plan analyzes problems, sets guidelines, activities and budget. Characteristic tambon problems were surveyed to recommend priorities and solutions to the TAO council. Solutions are prioritized, according need, potential and TAO capacity and to coordinate development with other agencies. Local budget for work, project and development activities might also involve attracting supporting schemes from other government agencies, to bring other development projects to the TAO: MP's budget, government and non-government budgets.

TAO development planning process

The tambon annual development plan is the responsibility of the TAO administrative committee. It relies on the tambon five-year plan by drawing projects from it to place in the annual plan. The TAO prepares its own development plan and problem solutions. Having determined development projects, it prepares a tambon development plan. If other government agencies have development projects to be deployed within the TAO, they must be coordinated and integrated into the TAO development plan. TAO development clearly must coordinate between agencies (private and state). This is the basis of power distribution regarding local administration's self-development decisions.

Conclusions and recommendations

To maximize popular participation in local planning, it is necessary to introduce some degree of decentralized planning and financing to facilitate the process. Local committees, leaders and people should be trained on how to actively and effectively participate in planning, to build their capacity and teach them how to work with a government agency.

Participatory planning has no standard form in operational terms through which it could be executed. A great success of one project in terms of its effectiveness, attributed to people's participation may or may not be relevant to another project due to variations in the local situation and environment. It is imperative to study an area profile as well as the local power structure, dynamics and circumstances before introducing any participatory strategy. There is a great need to take empirical factors - including socio-economic, cultural, political and administrative settings - into consideration to design suitable participatory interventions.

Local government agency field staff working closely with local people should be trained to work intensively and flexibly within local people's participatory setting. At the national level, FAO and donor agencies/countries should assist in conducting research, training and action-oriented programmes on decentralization to strengthen the process of decentralization.


Chalermsukjitsri, C. & Vikijakarnkoso. Summarization of structure and authority of tambon authority organization, Bangkok, Ministry of Interior.

Demaine & Ahmed, eds. 1987. Impact of decentralization on rural poverty: an Asian perspective, HSD Conference Proceedings No.5.

NESBD, Development Guidelines of the Eighth National Economic and Social Development Plan, Bangkok, Office of the National Economic and Social Development Board.

Pongquan, S.. People's participation in local level planning: a study of Thailand. Bangkok, Office of the National Economic and Social Development Board.

5 Thailand cooperatives role in decentralized rural development for poverty alleviation and food security at the community level, Asanee Ratanamalai, Ph.D, Thailand

The cooperative movement promotes popular development, especially in improving the economic condition of the farming population. Cooperatives in Thailand were initiated by the government in 1915 to improve the livelihood of small farmers, to relieve severe indebtedness and to maintain land ownership. The government was greatly concerned with the deteriorating economic and social conditions of the mass of farmers, especially in the central region. Rice production and trade were becoming commercialized, but farmers could not fully benefit fully. Natural disasters put them in severe chronic debt: they were unable to repay their loans. Farmers were losing their farmlands, becoming landless labourers and leaving debts unpaid.

Government provided initial funds to be loaned to members against land mortgages and guarantors. Thailand's first cooperative, Wat Chan Cooperative Unlimited Liability, was established among small farmers in a Pitsanulok province village adopting the German Raiffeisen's principle. Its success as a village credit cooperative to to the founding of others. The Cooperative Societies Act (1928) further developed cooperatives. In 1932 more types of cooperatives were organized - land settlement, consumer, fisheries, hire purchase, marketing and processing, land improvement and thrift and credit cooperatives. The Cooperative Societies Act (1968) repealed earlier act and established the Registrar of Cooperative Societies as the authority to register, promote and supervise cooperatives.

Thailand's cooperative movement is considered an important factor in economic and social development and it receives both technical and financial assistance from government. To provide this assistance, the government has established: The Office of the Registrar of Cooperative Societies to deal with registration, liquidation and supervision of cooperative societies under the cooperative laws; the Cooperative Promotion Department to survey, establish, promote and guide cooperatives and help them conduct their business, and the Cooperative Auditing Department to conduct both auditing and guidance in financial and accounting management.

Cooperatives are vertically organized in a three tier system: primary cooperatives at the local level with provincial and national level federations. The Cooperative League of Thailand (CLT) is the leading national NGO representing 5 418 primary cooperatives of all types with six million member households in six major types of cooperatives: agriculture, land settlement, fisheries, thrift and credit, consumer and service cooperatives. Agricultural cooperatives are the core of the movement and play a vital role in enhancing socio-economic life, especially in rural areas. Established in 1968, it promotes and develops the cooperative movement, to conduct research and training for leadership development within the movement, builds and expands cooperative activities and is the representative movement to build and expand cooperatives in Thailand and internationally.


The first cooperative in Thailand - the Wat Chan Cooperative Unlimited Liability - was established by the government in 1916 in Phitsanulok. It was a small village credit cooperative of unlimited liability, with a single purpose and a small number of members: to help severely indebted farmers. The success of this type of cooperative resulted in many farmers saving their land from forecloseure by money-lenders, and led to the expansion of a large number of small village credit cooperatives in all parts of the country. By 1983, other types of cooperatives had been developed according to people's needs in the form of both production and consumer cooperatives.

In 1947, to facilitate financing cooperatives, the government set up the "Bank for Cooperatives" with government capitalization. Village credit cooperatives were urged to hold share capital in the bank in the hope that they would, in future, become owners of the bank as their own financing center. In 1952 and 1953, provincial cooperative banks were established in Chiang Mai and Uttaradit provinces by affiliating village credit cooperatives in each province. The cooperative banks served their affiliates so well, both in terms of meeting credit needs and holding surplus funds in deposit, that a programme for setting up new provincial cooperative banks was formulated. Unfortunately, the enactment of a new Commercial Bank law in 1962 laid down that acceptance of deposits on current accounts could be operated only by commercial banks organized as limited liability companies. The two provincial cooperative banks had, therefore, to be reorganized into federations of credit cooperatives, and a programme to set up new cooperative banks was dropped. In 1966, the government-cum-credit cooperative-owned Bank for Cooperatives was reorganized into the "Bank for Agriculture and Agricultural Cooperatives", a state enterprise, functioning as a financing centre of agricultural cooperatives and lending directly to individual farmers as well.

In 1968 with the objective to facilitate the strength of the cooperative movement, the Government enacted the Cooperative Societies Act, BE 2511, which allowed the establishment of the Cooperative League of Thailand, which functioned as the apex organization of the cooperative movement. The act also facilitated government implementation of an amalgamation programme which combined neighboring small village credit cooperatives as well as paddy and marketing cooperatives, land improvement and land settlement cooperatives into district level cooperatives, performing multipurpose functions. These were officially categorized as agricultural cooperatives. At present, cooperatives in Thailand are officially categorized into six types: agricultural; land settlement; fisheries; consumer; thrift and credit; and service.

Structure of cooperatives

Cooperatives in Thailand are vertically organized in a three-tier system: primary cooperative, provincial federation and national. The primary cooperative consists of individual members. In the case of agricultural cooperative, average memberships are 1 300 households per society divided into groups at the village level. Three or more primary cooperatives can form a provincial federation, for joint activities on behalf of their primary affiliates such as processing of agricultural produce. At national level, there is the Agricultural Cooperative Federation of Thailand with which all 76 provincial agricultural cooperative federations are affiliated. At this level, there are also Sugarcane Growers Cooperative Federation of Thailand, Swine Raisers Cooperative Federation of Thailand, Dairy Cooperative Federation of Thailand and Onion Growers Cooperative Federation of Thailand. Land settlement cooperatives have a regional federation in the Central Region whereas thrift and credit cooperatives and consumer cooperatives are affiliated in a national federation of their own.

Cooperatives at all levels must be the affiliates of the Cooperative League of Thailand (CLT), according to the Cooperative Societies Act 1968. The CLT functions as an apex organization of the cooperative movement. It does not run any business enterprise, but operates as a promotional, educational national organization of cooperatives throughout the country.

Role of cooperatives providing marketing, servicing and credit facilities

Agricultural cooperatives are established in order to enable farmers to engage together and help each other in business and for a better living. After the first credit cooperative was established in 1916, the number of cooperatives increased steadily until the promulgation of the Cooperative Societies Act in 1968. Several cooperatives grouped together, formed agricultural cooperatives at district level, and became bigger and stronger cooperatives with more services to members.

Thailand's cooperatives provide credit, sell agricultural supplies, market produce and provide agricultural services: Credit - Agricultural cooperatives accept deposits and lend money to members at low interest for agricultural supplies and farm machinery; Sales - Buying and selling agricultural supplies and consumer goods can reduce production costs and provide convenience to members; Marketing - Gathering member produce to jointly sell directly to markets or through provincial/national federations giving members bargaining power to sell produce at good prices with fair weight and measurement. With the help of government, some cooperatives export abroad; and Agricultural services - Agricultural extension services on an expense-sharing basis at reasonable fees include land improvement, irrigation and demonstration farms.

Government established land settlement cooperatives to solve the problem of landless farmers and farmers with insufficient land holdings by allocatiing land through the cooperative system. After receiving land for allocation, the Cooperative Promotion Department (CPD) surveys the land, assesses soil types, rainfall and water resources and the like, both for planning and support services such as irrigation. Roads, schools, health centres and a market centre will be provided in land settlement cooperatives. The CPD provides selected farmers training on cooperative principles and practices, and procedures for establishing cooperatives, including the rights and duties of members. After the training, the farmers can work on land assigned by the cooperative authority. After members occupy and farm the land, the Cooperative Promotion Department helps form a cooperative and its management, including production, credit, business services (marketing and supply), land ownership and services to the cooperatives. There are three types of land settlement cooperative: Land settlement cooperative; Land Hire-purchase Cooperatives; and Land Tenant Cooperatives.

Only members of land hire-purchase cooperatives will be given the right of ownership when they have fulfilled the conditions set by the cooperative. They must: be members continuously at least five years; fully utilize the land for farming purposes; investment recovery costs and land payment installments must be fully paid; all debts with the cooperative have been fully paid; and they must obtain approval from the cooperative and the Cooperative Promotion Department.

Service cooperatives are organized among workers in the same occupation to solve mutual economic problems. The Umbrella Producer's Cooperative in Chiang Mai, formed by traditional umbrella makers, was the first service cooperative in 1941. Other service cooperatives were later established: Cottage industry cooperatives - formed among handicraft workers to deal with raw material supply and marketing, encourage use of local materials; Transportation cooperatives - low-income workers in transport services, including bus, taxi, tricycle and minicar cooperatives; Housing and community service cooperatives; Infrastructure service cooperatives - formed in a locality to deal with shared infrastructure concerns such as electricity, arrtesian well water and water supply.

The cooperative movement is an important grass-roots community activity for economic and social development, especially in rural areas. It receives technical and financial assistance and support from central and local governments. The Cooperative Societies Act (1928) brought additional cooperatives, followed in 1932 by even more diversity. The Cooperative Societies Act (1968) facilitated expansion and improvement of the cooperatives. Today's cooperative societies promote participatory decentralized rural development at the grass-roots level as well as democratization.

The Cooperative League of Thailand and strengthening decentralized rural development

The Cooperative Societies Act of 1968 proclaims the Cooperative League of Thailand (CLT) consisting of cooperative-society members operating on a non-profit basis. It is the only organization dedicated entirely to promoting cooperatives. Other cooperatives established under the act include the Agricultural Cooperatives Federation of Thailand Ltd., the Federation of Savings & Credit Cooperatives of Thailand Ltd. and the Consumer Cooperatives Federation of Thailand Ltd. - which differ from the League, functioning mainly as business activities to benefit their member-cooperatives respectively. In 1998, the CLT comprised 5 418 cooperative societies serving 6.6 million members in primary level cooperatives. There are three levels of federations affiliated to the League: 15 National Cooperative Federations with 1 600 member societies, three Regional Cooperative Federations with 33 member societies and 81 Provincial Cooperative Federations with 1 271 member societies.

The CLT exists to promote cooperative societies, research and compile data on their activities; give technical advice and assistance and provide facilities for communication and coordination between cooperative societies and government agencies or persons; provide technical study and training; promote relationships between cooperative societies, relationship with foreign cooperative organizations with like objectives; purchasing, procuring, disposing of, holding ownership, possessing or executing a juristic act in respect of any property. Under the provisions of the Cooperative Societies Act 1968, the Cooperative League of Thailand consists of cooperative society members. All types of cooperative societies are members of the League. There are six types of members: agricultural cooperatives, fisheries cooperatives, land settlement cooperatives, consumer cooperatives, service cooperatives and savings and credit cooperatives.

Table 1: Cooperatives in Thailand*


Number of Societies


Agricultural Cooperatives

3 250

3 876 582

Fisheries Cooperative


9 855

Land Settlement Cooperative


118 594

Consumer Cooperatives


725 433

Services Cooperatives


116 247

Savings and Credit Cooperative


1 795 873


5 418

6 642 584

National Cooperative Federations 15 with 1 600 Member Societies

*as of May 1998

Regional Cooperative Federations three with 33 Member Societies

Provincial Cooperative Federations 81 with 1 276 Member Societies

6 An alternative approach to development: A case study of the Bangchak petrol stations, Dr Supriya Kuandachakupt, Thailand

Thailand adopted its First National Economic and Social Development Plan (NESDP) in 1961. From then to the current Eighth Plan, it has undergone many changes in its economic and social structure. Thailand was formerly an agricultural society; now it is partially industrialized. Thailand's overall economic growth rate was maintained at a high level and had reached double-digit levels in 1988-90, before the present economic crisis. However, during that time -which seemed to be the growth period of the country - the income gap between rural and urban sections had been worsening. Past development has clearly resulted in a growing dual economy. Although general welfare has improved, social problems have appeared to increase substantially and an alarming decrease of society's morale is being witnessed. In rural areas, families are fragmented, weakening family ties due to rural-to-urban migration. The market economy of major cities and consumerism extending into the village, falsely understood as development, has changed the values and lifestyle of villagers. Rural areas are losing their identity and the basic institution that underlies rural society, i.e. the family. In the process of development, Thai society changed from self-reliance to dependency, seeking employment instead of farming, buying instead of producing, making money at the cost of ecological degradation and exploiting natural resources instead of preserving resources and the environment for sustainable use.

Counter to this trend, some villagers found a way out by creating a group and working on virtues of trust, sharing and cooperation; and virtues of small-scale community business. To make this alternative sustainable, the villagers know that they have to be self-reliant. The problem is their lack of control over productive resources.

The purpose of this study is to look at one model of rural development, which starts from the initiation of the civil society organization, then getting help from a donor corporation to attain self-reliance and sustainable development. The model follows the concept of the New Theory of Development, by H.M. King Bhumipol Adulyadej of Thailand and the Theory of Balance. The study concludes with the observation that sustainable development can be achieved through self-reliance, and that all agents involved in the process of development will profit by mutual cooperation and benefit-sharing in terms of co-investment, co-management and profit sharing between community and business. In the long run, with the help and cooperation of business, the strength of the civil society organization will increase. Instead of being a threat to business corporations, this will expand their business and their profit in the long run.

Bangchak community petrol station in Nakorn Prathom Province is a case study. A comparative study of four Bangchak community petrol stations and four privately-owned petrol stations in the same location by pairs was carried out in 1997. Bangchak community petrol station is a programme launched by a petroleum company with the objective of doing business as well as helping communities to develop themselves. The company jointly invests in the petrol station, provides training and shares the profit. The company then allows the cooperatives to buy off the company's share and the community group eventually owns the petrol station.

The four agricultural cooperatives that were studied are the Bang Lane Cooperative Group (BL), the Don Toom Cooperative Group (DT), the Nakorn Prathom Cooperative Group (NP) and the Kampangsan Cooperative Group. Facing the same kinds of problems - poverty, low-income, lack of control of factors of production - they were determined to escape these problems. They formed a cooperatives group working on trust and moral code of conduct. The most important and needed factor of production was low cost capital for investment. All started as small groups of farmers setting up savings cooperatives for production. They have survived through trial and error, but it was difficult for them to gain higher income from farming alone. To gain higher income, they needed to expand and diversify into community business, i.e. to do marketing and distributing products to outsiders. To be able to do this, they needed outside help and cooperation.

In the old paradigm, business is about competitors, exploitation, profit and taking full advantage of others. This case study provides a new paradigm for business: strengthen the community, develop by sharing profit, train for local operation, management and employment; preserving the environment; developing reasonable business contracts for community business to grow, so that business will yield better returns to the community in the long run and contribute to its sustainable development. What has been learned from the case study is that the rural development process has to be step by step, according to the New Theory. Thus, sustainability can be achieved through interdependency, cooperating equally between community and business and a new "balancing" business paradigm.

Thailand adopted its First National Economic and Social Development Plan (NESDP) in 1961. From the First to the current Eighth Plan, it has undergone many changes in its economic and social structures. Thailand was formerly entirely agriculturally oriented, with more than 80 percent in farming. Now it has become quite industrialized with about 60 percent of the population in agricultural sector. The age share of agricultural product in GDP has declined while that of industrial product has substantially increased, and is now more than double the agricultural product. (Table 1) The rate of growth of the industrial sector is higher. (Table 2) In addition, the income from exporting industrial products has increased at a faster rate and is higher than that from agricultural products.

The overall economic growth rate has been maintained at a high level and reached double-digit levels during 1988-90, before the decline due to the present economic crisis. However, during the time, which seems to have been the country's primary growth period, the income gap between rural and urban sections worsened. Average incomein the farm sector declined, from one-sixth of the non-farm sector in 1990 to one-twelfth in 1995. The top 20 percent of households earned 58.74 percent of total income while the bottom 20 percent earned 3.48 percent in 1995 and expected to be even lower in the year 2000. (NESDB, Thailand 2000, 1997) Past development has clearly resulted in an increasingly dual society, caused by the centralization of economic and political decisions and the concentration of resources and benefits in Bangkok and a few big cities. Migration to big cities for higher income and social status has created problems in both rural and urban areas. In rural areas, families are disintegrating' workers are losing family ties. The market economy of big cities and consumerism extending into the village, falsely understood as development, has changed the value system and the way of life of the villagers. Rural areas are losing identity and the basic institution that underlies rural society, i.e. family and community ties. What is happening is that Thai society has changed from self-reliance to dependency, seeking employment instead of farming, buying instead of producing, making money at the cost of ecological degradation and exploitating natural resources instead of preserving resources for sustainable use.

Counter to this trend, some villagers realized the root of the problem and found a way out by creating a group and working on virtues of trust, sharing and cooperation and virtues of small-scale community business. Community business means businesses that are operated by local communities and benefits are shared among villagers in terms of membership and low interest loans for investment. To make this alternative sustainable, the villagers know that they have to be self-reliant. The real problem is the lack of control over productive resources. To overcome this problem, they have land and labour, what they need are low interest capital, technology, expertise in management at a low cost and low transaction costs. Various types of savings cooperatives have been set up, some have become very successful, proving the management capability of the villagers, but some have failed and need outside help to restore them. As for other productive resources, villagers have to seek from outside sources as well. The problem is where? And at what cost?

The purpose of this study is to look at one model of rural development, the process of which starts from the initiation of civil society organization, then getting help from a big corporation to become self-reliant and sustainable. The model follows the concept of the New Theory of Development, of H.E. King Bhumipol Adulyadej of Thailand and the Theory of Balance. The study illustrates that sustainable development can be achieved through self-reliance, and all agents involved in the process of development will profit by cooperation and benefit sharing in terms of co-investment, co-management and profit sharing between community and business. In the long run, with help and cooperation from business, the strength of the civil society organization will increase. Instead of being a threat to business corporations, this will expand corporate business and profit in the long run. This is the survival path of both agents in the long run and therefore the sustainable development

What is the problem in rural areas?

From the Socio-Economic Survey of Agricultural Households conducted by the Office of the Agricultural Economics, Ministry of Agriculture and Cooperatives in the crop year 1995-1996 we obtain the general characteristics of agricultural households as follows. The majority of household heads, 90.9 percent, are male, with the average age of 49 years. The average household size is 4.83 persons with average size of household labour of 2.48 persons. Most household heads, 76.19 percent, have only primary education; none have gone up to the college level. The average farm size is 25.12 rai. Only 44.92 percent of households have access to irrigation. The annual average per capita net income is 5 325 baht for a small farm size, 14 404 baht for farms of the size 10-29 rai, 10 064 baht for 30-59 rai and 6 848 baht for 60 rai and over. As expected, irrigated farms generate higher income than non-irrigated ones. The average short-term loan is 9 205 baht per household, the average medium term loan is 8 636 baht and the long-term loan is 14 566 baht per household.

The characteristics of agricultural households in Thailand have changed little despite high rates of economic growth during this time. They are poor, with low education; they lack management skills needed for operating farms. They have no control over big capital, investment and the market. Besides, consumerism is widespread in rural areas. Cash economy reduces the capacity of rural households to get basic life necessities. Medical care, personal and children's education, management and professional skills are difficult to obtain without cash. This limitation puts farmers in a disadvantageous position in the fiercely competitive market. Moreover, money is misused on non-necessities and gambling. Their capacity to play an active role in building their civil society is discounted by the centralization of economic and political power.

Case studies

Village bank and credit unions of Lad Bualuang Patana

Due to poverty, debt and lacking investment funds, farmers in Village No. 6 Tambon Phraya Bunloe, Lad Bualuang, Ayudhaya province in 1975 together set up a savings cooperative with 38 members and initial funds of 1 140 baht (US$57 in 1975). In three years, they had 48 000 baht and 67 members. Problems in accounting and record keeping arose; villagers lost confidence in the cooperative. Only 12 members and 1 700 baht remained; the project failed. In 1990, facing the same problems and determined to rise above them, a new group was begun, with 24 members and 950 baht. It operated until 1993 with capital of 240 000 baht. Again, problems developed; the cooperative stopped.

To solve their problems, the group sought expert help and made a study tour to a credit union. The group divided regarding the result: one section thought a credit union would help solve their problems while the other did not. A majority of the members, 208 villagers, resigned from the old group and formed a new credit union with capital of 14 000 baht. With the help of the credit union network, the group was strong; they named themselves "Village Bank and Credit Union of Lad Bualuang Patana".

There are now 225 members and 81 affiliates, with capital of 3 196 224 baht (1997). They work on the principles of honesty, devotion, responsibility, sympathy and trust. Unlike Thailand's national economy, there are no "non-performing loans". Revenue comes from constant accumulated member shares, operating profit and paybacks and interests from loans. Because of their performance and keeping their principle intact, they are able to secure a large number of loans from the Government Savings Bank and the Credit Union Group. Now they can expand into community business as the chicken-and-egg group, the mixed farm group and a pilot project of the King's New Theory of Development. These are possible because of the devotion of one person, the president of the group operating committee. He is trustworthy, devoted and looks out for means to solve problems. He is determined to have training in what is needed, management skills, computer skills, and to seek help - when needed - from all sources, non-formal education, experts, credit union training center and even from his daughter, an open university student. He told everyone that the path he has taken is not easy and he is still striving to make it work. Nevertheless, he is determined to have a better life, not only for his family but also for other villagers.

Saklee community development

Saklee village had problems similar to Lad Bualuang. Villagers were poor, had no investment capital and lived at a subsistence level. Families were disintegrating from migration to get jobs in Bangkok and foreign countries. Khun Surin, a teacher, decided to lead the villagers to a better life, so he persuaded them to do mixed farming. In 1987, a new superhighway passed through the village and was followed by industrialization and factories. Suddenly, village life was drastically changed. Surin tried to blend the two cultures together, a traditional agrarian society and a new industrialized society. He called for an adjustment by all villagers to cope with the rapid change to accept and make use of it. In 1989, a savings cooperative group was set up, providing loans for community business taking advantage of employees in the factories, selling food, fruit and vegetables to them. Because of the large market, business is good. There are no non-performing loans and the group operates profitably on the principle of honesty, responsibility, sympathy and trust under the leadership of Khun Surin.

Community petrol station in Nakorn Prathom

The Bangchak Company launched a programme called the Community Petrol Station, following the concept of the King's New Theory of Development. It illustrates cooperation between big business and the community. A village with a group of people determined to pursue a better life will have a natural group initiating some activities. Because of the lack of capital, usually the setup group will be a savings cooperative. When the group is strong, the Bangchak Company will help them do business as a small petrol station. There are three types of projects: totally Bangchak invested, totally community invested, and co-investment and turnkey.

Dr Supriya and a student conducted research on eight petrol stations: four Bangchak stations comparing them to four privately owned petrol stations in the same location by pairs in Nakorn Prathom province. In each petrol station, the manager was surveyed by questionnaire. At each Bangchak community petrol stations, 25 group members were also sureveyed. Although this sample, it was thought to be reasonable.

Table 1: Initial costs and sources of funds


Privately Owned

Community Owned


Source of Funds

Costs Source of Funds


4 500 000

bank loan with collateral

500 000



8 000 000

savings and bank with collateral

300 000



3 800 000

bank loan with collateral

1 000 000

loan from savings bank


6 000 000

bank loan with collateral

400 000


The first reason given for changing consumption to the community brand and community stations is that members have dividends from the total sales or total profits. Other reasons given were high quality petrol, relatively low price, convenient, and friendly services. The income of members increases due to dividends, low factor of production costs, and revenue generated from loans which are invested in production. The savings group is able to provide welfare like emergency funds for medical costs or funerals. At community petrol stations, Bangchak also trains villagers, provides high quality petrol at a discounted price and also provides technical and management help.

The benefits are that villagers have higher income, more skills in management and marketing. The savings cooperative group has more operating capital, no bad debts. The group is also able to expand into other community businesses and make more profit. As for Bangchak, the number of petrol stations increases substantially, sales increase and the villagers develop brand loyalty.

Bangchak also gains a good reputation with no need to pay a substantial amount of money on advertising or promotional campaigns. With the decision not to take too much advantage of the villagers, Bangchak shares its profit and expertise. All agents involved gain from trade. In this way the community civil society can become stronger and there is a better chance that this kind of business will last.

What was learned

We have learned that development should be carried out step by step. In addition, at each step, farmers should be self-sufficient and self-reliant. Then with their limitations, they should seek outside help. Outside help may come from a big corporation, a multinational corporation, NGO or a foreign donor agency. Each one of them should support the strength of the community, support the group's principle. Coexistence and cooperation should provide a better means for development. Human resource development is also very important. Mr Surin of Saklee and Mr Sumruang of Lad Bualuang are examples showing that honesty, leadership and technical knowledge are the keys to village development.

7 Decentralized rural development and the role of self help organizations in Nang Rong, Buriram, Wilas Lohitkul, Thailand

In recent years we have seen an attempt to improve economic conditions and income through diversification of income generating activities. By introducing industrial businesses such as footwear and clothing manufacturing, export earnings increased, bringing much-needed foreign exchange into the national economy. This approach is aimed at establishing Thailand as a Newly Industrialized Country (NIC) in the future, which will increase its political as well as economic power.

The effects of this approach on the nation's development that have become visible are that increased income is restricted to urban residents and rural people do not receive these benefits. In fact, government development assessment has shown that the income of urban residents has increased ten times more than that of northeastern rural residents. The northeast is home to approximately one-third of the population of Thailand; thus this income disparity is increasingly worrisome. Some 15 million people in the Northeast are considered to have incomes below the poverty line. Their average income is 4 141 baht per person per year (US$96). It is obvious that this kind of development approach is inappropriate and detrimental to the community, particularly in rural areas, by creating a wider gap between rich and poor, which become increasingly difficult to bridge. To exemplify the development of this situation, in 1976, 49 percent of Thailand's wealth was held by 20 percent of the population. By the 1990s, 55 percent of Thailand's wealth is held this group. In 1988, the poorest 20 percent of the population experienced reduced income holdings from 6 percent to 4.5 percent of national wealth.

It is apparent that this trend of an increasing gap between rich and poor will continue if this development approach is continued. Realizing the danger, government policy regarding national development was altered to ensure that rural areas would have their growth needs addressed in every situation. The government applied a large portion of the annual national budget to development needs to achieve successful outcomes. The most important objectives set by government include provision of local health care centers, water and dam development, road improvement, widespread availability of electricity and schools.

The rural population has all these things but they are still poor

All development approaches of the government to this point have been towards industrialization but these approaches are essentially inappropriate because the majority of the population is rural and are involved in agriculture. They have no experience with business, marketing and other skills that go with industrialization. This gives rise to other problems such as debts due to mismanagement as well as markets being oversupplied and swamped with various products. Furthermore, production quality was quite often found not to fit contract specifications, which in turn created further problems with continuity of work and surplus of inferior quality goods. Factors that further influenced rural based industrialization included the fact that rural residents did not have the power to negotiate fair prices for their products. This kind of power is restricted to a small group of people who are already active in business in their own right.

Even though the government wanted to emphasize group or cooperative development among previous agricultural producers, the act of establishing businesses within these groups was more difficult than the government planned. This was due to the fact that the rural residents lacked the skills to establish and run businesses and so encountered the problems listed above. Due to this situation, it is necessary for all members of the public and private sectors to coordinate, develop, strengthen and improve economic and social organization. By doing this it will enable the population to adapt to local, national and international needs and economic changes in the future.

PDA's involvement in rural development

PDA is a community-based non-government organization established in 1974 by Mechai Viravaidaya as chairman and Tawatchai Traitongyoo as secretary. Its objectives are: 1) To provide training and information to the rural population of Thailand to enable them to have access to information regarding family planning in a self help format; 2) To support the community and encourage them to become involved in local development activities to benefit their community; 3) To help the development process of the government in areas of environment, public health and employment; 4) to provide a center for training and exchange of ideas for population education, family planning and village development.

Phases of development with PDA

1. Family planning and basic public health

PDA began activities in 1974 with mobile health education teams, teaching family planning and health. At this time PDA's activities were both urban and rural. Teams established a network of community volunteers trained in family planning and health activities to be able to educate their own communities. By doing this PDA reached 16 000 villages in 157 districts in 48 provinces. The total number of active volunteers was 12 000.

2. AIDS education

With the advent of HIV/AIDS in Thailand, PDA adapted their educational activities to include intensive education regarding HIV/AIDS prevention. A major part of this education included training in means of prevention and the negation of myths regarding HIV/AIDS and its transmission. Again, the volunteer network was mobilized for this programme.

3. Development of water resources

In 1980, PDA began a programme to develop water resources in Thailand's Northeast, in particular to overcome common water shortages. This programme aimed at providing clean water for domestic use by using rainwater tanks and jars as well as bore wells and tanks for village use. PDA also established the development of SKY water tanks, which provide much needed irrigation to agricultural land. This programme was again based around a self help system of development, with the community members being actively involved in tank construction and maintenance.

4. Women's and children's rights development

PDA aimed to promote the role of women and children in the community and enable them to have a voice in development decisions.

5. Environmental awareness

Under this programme, environmental awareness was promoted through participatory activities at the school and village level. PDA aimed to encourage rural residents to care for their own environment and reduce use of chemicals in agricultural production.

6. Development of higher rural income

Through their activities, PDA was exposed to the real problems of the rural communities and realized the real need for a permanent community-based center for rural assistance. PDA set about establishing community-based integrated rural development centers (CBIRD) which could assess and respond to the changing needs of the communities in which they were based.

Case study: CBIRD Nang Rong

Development organizations face many problems in the process of implementing development programmes. The first of which is the ability to reach all the people in their own area. For example, CBIRD Nang Rong is responsible for programmes in 90 villages in 13 subdistricts (four subdistricts have since become districts, Chumni, Non Suwan, Nang Rong and Chalermpragiad). The problems CBIRD Nang Rong faced were not much different from those faced by other CBIRD centers in other areas.

1. Many villagers often carry debts from moneylenders, at high interest rates. Some farmers borrow money for fertilizers or other agricultural input at interest of 120-240 percent per year.

2. Villagers lack marketing skills and business management skills.

3. Natural disasters such as floods and droughts reduce agricultural production.

4. Villagers lack the ability to survey market needs and trends and to adapt to suit the market.

5. Environmental degradation impacts upon agricultural production and quality.

6. Rural-urban migration.

7. Basic public health needs are not available, especially in the case of children's health.

8. Children have only basic education as parents lack money for further study.

9. Cooperative management is weak.

Development Strategy

Self help development procedures and group cooperation

Promote organizational plan

Under this system, CBIRD acts as a go-between in the establishment of markets for agricultural produce and home industries. In this way, villagers are able to use their traditional skills and crafts to increase their income. CBIRD assists with training in areas such as management, negotiation and funding. A field worker based at the CBIRD center is allocated to each project in order to address any problems that the villagers may be experiencing. Furthermore, villagers are assisted in the provision of funds for initial start up and further expansion costs by a system of low interest loans. By doing this the villagers gain ownership over their project and learn new management and business skills. Some businesses that CBIRD has helped villagers establish are chicken and duck egg raising, pig raising, silk weaving, vegetable raising, sweet making and chicken raising for meat.

Promote group cooperation

By establishing these connections, CBIRD aims to reduce one of the main problems of the villagers, that of debts to moneylenders which incur high rates of interest. In order to reduce these difficulties, CBIRD encourages villagers to form groups which in turn increases their buying power and enables them to achieve better results from the support training provided by CBIRD. The most important factor when establishing groups such as this is to ensure that the village is able to develop a strong village fund basis upon which they can expand their activities and that the activities can expand to further villages.

Fertilizer Bank

When we compare the fertilizer from the trader with that provided through CBIRD we see that there are obvious advantages for the farmers in using CBIRD fertilizer. When the farmers go to the trader, they must pay 320 litres of rice for every bag of fertilizer that they receive. In contrast, when they decide to start using the CBIRD system they must pay only 220 litres per bag of fertilizer. This means that the villagers will have an excess of 100 litres of rice. Providing that the villagers then use this surplus rice to establish their village group fund, CBIRD will return 40 litres of rice to supplement their fund as well as providing a further 100 bags of fertilizer. Once the fund has been established, the villagers can continue to buy fertilizer from CBIRD for only 180 litres of rice per bag, a reduction of 140 litres from that of the trader.

Rice bank

At the beginning of the rice season, rice farmers usually borrow one bag of unmilled rice from the trader for planting. When they repay this debt they must pay back double the amount of unmilled rice that they borrowed. To cut down these high interest rates CBIRD established a system of borrowing that had the farmers paying back 1.5 bags of rice per bag that they borrowed. Then, CBIRD would in turn give this extra half bag to the village rice bank in order to increase their village fund.

Fair prices store

To provide villagers with access to fair priced goods and provide another form of income, CBIRD helped establish fair price stores. Shares were set at 100 baht each, villagers invested their money to develop and buy stock for the store. Villagers then share in selling products at the store to provide them with a sense of responsibility and ownership. At the end of each year, the profits are divided among the shareholders.

Subdistrict cooperative development method

After working in village-based activities for some time, PDA determined that there was a possibility and in fact a need for further expansion of activities on a subdistrict level. This was to take the form of subdistrict cooperative development. However, it is necessary when developing businesses along these lines that they be established in an appropriate manner. To this end, PDA sought support from government as well as other businesses, in this process. While discussions were taking place with Government departments, villagers who had shown an impressive ability to manage and develop businesses on a village level were approached by PDA to participate in this new area of development. The ensuing businesses that were established were registered as cooperatives of the subdistrict to ensure that villagers retained control of their business. When all 13 subdistricts had established cooperatives they came together to further strengthen their position which is the first move in the plan for villagers to become business people.

Business development among cooperatives

When developing a business in cooperatives on a subdistrict level it is necessary to have staff with skills in business management and marketing that they are able to use regularly and effectively. From PDA's experience in engaging business in this funding group style it is simply a starting point for the establishment of small businesses allowing the government to assist at this level of development. From this point, the process becomes more complicated. In order to achieve the desired goals, it is necessary to preserve this form of development. If we want to close the gap between the rich and poor it is necessary to improve rural income and help villagers to establish themselves as credible business people and train them and support them in their business endeavors.

The Thai Business in Rural Development (TBIRD) programme is the most important key to development of business in rural development. PDA has been able to combine the assistance of established businesses in this programme, to the advantage of newly established cooperatives. PDA has done this through the sharing of skills in business and marketing between businesses and local cooperatives.

1. Promote support from private businesses so that they have a role in establishing cooperatives as well as coordinating with the government and community to develop rural areas.

2. Promote the aptitude of rural residents in the area of skills development in order to improve the local economy as well as improve self help methods more effectively.

3. To provide more employment opportunities with higher income for rural residents.


The following are the administration and coordination characteristics of this kind of development: 1) Government organization; 2) Private businesses; 3) Community organization and 4) NGO

The main advantage of this form of development is the growing body of skills of the cooperative members through the support and exchange of skills and ideas between the villagers and private businesses. With the cooperation of the government and NGOs, projects such as these are further facilitated and their chances of success become greater.

Impact and effect

1. Allows rural residents to obtain knowledge and experience in running businesses as well as administration, management and marketing skills.

2. To give rural residents the opportunity of business ownership or to become shareholders in a business. This, in turn, allows them to utilize their skills to their full potential for their own benefit.

3. To reduce rural-urban migration and improve employment and career opportunities for rural residents in their own region.

4. The business sector reduces overheads because it does not incur costs associated with labour and production maintenance as these costs are absorbed by the cooperative.

5. Allows the family unit to live together which in turn strengthens both family and community values.

6. Following the setting up of factories and cooperatives in the rural areas, the population of these areas increases due to the return migration of people from Bangkok. This provides agricultural producers with a larger number of buyers to sell and thus increases their income and improves the general economy of the community.

8 Roles of agricultural cooperatives and village credit unions in rural financial markets in Thailand, Paradorn Preedasak[2]; Viroj NaRanong, Thailand

This study[3] examines agricultural cooperatives and village credit unions (kloom orm sup) in rural financial markets in Thailand. Both organizations serve as lending sources and mobilize savings in rural Thailand. The study focuses on factors that determine their successes and failures. It also attempts to provide a brief assessment of the ability of these organizations to become viable sources of credit in rural areas and their competitiveness relative to the Bank for Agriculture and Agricultural Cooperatives (BAAC).

Cooperatives were founded and have been promoted by the government since 1916, with agricultural cooperatives as one of the oldest types of cooperative. Agricultural cooperatives have the largest number of branches and members. Like most cooperatives in Thailand, agricultural cooperatives are far from being successful. Their major role today is to provide credit to members. For most agricultural cooperatives, the major source of funds is the BAAC. However, figures from recent years indicate that they have been more active and successful in mobilizing savings themselves.

Village credit unions are organizations founded to mobilize savings and later to serve as small financial intermediaries in rural areas, usually at the village level. Union members pledge to save a certain amount of money each month. In most cases, the money is lent out immediately to borrowers, most of whom are also members of the group. Credit unions have been promoted by the Department of Community Development (DCD), Ministry of Interior (MOI) since 1974; however, most credit unions remain private organizations. Some charge higher interest rates, higher than the legal ceiling, yet lower than the rates normally charged by informal lenders. Except for a handful of village credit unions in the southern region, most credit unions are small and accessible to only one village. Overall, the volumes of savings and loans through credit unions are rather small.

The organization of the chapter is as follows. Section II describes agricultural cooperatives and their roles. Section III deals with village credit unions. Section IV discusses underlying factors that determine successes and failures of both organizations. The last section provides conclusions and policy implications.

II. Agricultural cooperatives

Agricultural cooperatives were begun in Thailand in 1916. The Ministry of Agriculture and Cooperatives (MOAC) classifies them into seven cooperative groups: general agriculture; water user; para-rubber producer; land reform; dairy; swine raisers; and the government BAAC Agricultural Cooperatives for Marketing (sor gor tor). General agricultural cooperatives are the most common, with more members than all other agricultural cooperatives combined (excluding sor gor tor[4]).

In 1995, there were 2 832 agricultural cooperatives in Thailand (Table 1). General agricultural cooperatives account for 1 368 groups, while the remaining are ad-hoc agricultural cooperatives, e.g. water user (571), para-rubber producers (563), etc. The number of agricultural cooperatives, especially ad-hoc cooperatives, has grown substantially since 1990. The number of general agricultural cooperatives increased from 911 at the end of 1990 to 1 463 at the end of 1996. In the same period, membership increased from 0.85 million households to 1.45 million households. Given the regulation that limits the number of general agricultural cooperatives per district, the steadily growing numbers of the agricultural cooperatives and their members suggest that there is a continuing demand for this type of institution. At the same time, many agricultural cooperatives failed. According to figures released by the Department of Cooperative Auditing in 1995, 517 out of 2 237 agricultural cooperatives audited that year were inactive. In addition, 244 cooperatives experienced operational loss in 1995.

Table 1: Cooperatives in Thailand as of 1 January 1996

Type of Cooperatives

Numberof Cooperatives


Agricultural Cooperative Group

2 984

4 079 981

Agricultural Cooperatives

2 832

3 942 416

Fisheries Cooperatives


9 384

Land Settlement Cooperatives


128 181

Non-Agricultural Cooperatives

1 812

2 721 155

Thrift & Credit Cooperatives

1 127

1 881 129

Consumer Cooperatives


731 737

Service Cooperatives


108 289


4 796

6 801 136

Source: Cooperative Promotion Department, MOAC.
The number of general agricultural cooperatives is limited by the 1968 decree that requires all general agricultural cooperatives in one district to consolidate into one cooperative. As a result, the number of cooperatives decreased sharply within a few years. The rationale behind the decree is to strengthen agricultural cooperatives so that they could provide comprehensive services to their members. The government also believed that such consolidation was necessary for agricultural cooperatives to grow and become financially viable. However, Poapongsakorn and Siamwalla (1995) believe that the underlying reason was purely administrative, i.e. it is easier for government to control smaller numbers of cooperatives as well as make them or use them as state mechanisms to implement certain governmental measures related to farmers. Basically, agricultural cooperatives conduct some or all of the following businesses: savings and loans, providing inputs and machinery to members at low cost, gathering produce for resale, and other services and extension. Table 2 shows volumes and shares of these businesses.

Table 2: Volumes and shares of businesses of agricultural cooperatives, 1995

Type of business

Volume million (baht)

Share (%)


13 828.39



10 409.18


Sales of inputs & machinery

7 056.32


Gathering produce for resale

4 156.56


Other services & extension




35 551.77


Source: Department of Cooperative Auditing, MOAC.
Savings and loans

Historically, the main source of funds for most agricultural cooperatives was the BAAC. Therefore, most such cooperatives focused on their lending activities more than savings mobilization. However, figures from recent years suggest that agricultural cooperatives have been more successful in mobilizing savings from their members (see below). Lending to members has been the main activity of agricultural cooperatives since their inception. Most of their profits also come from lending activity. Each cooperative has a committee which meets monthly (or weekly) to consider and approve loan applications. Agricultural cooperatives charge borrowers 11-12.25 per annum, slightly higher than the rates charged by the BAAC, but a few percentage points below commercial bank rates. However, most agricultural cooperatives as a rule deduct about five percent from the loan and put it in the borrower's share.[5]

Table 3: Total loans and average size of loans in rural Nakorn Ratchasima, 1995

Source of loans

Total loans


Average size of loans per contract

Formal lenders

5 106 403 059


25 675


3 293 858 210


23 720

Commercial banks

503 660 339


71 350

Agricultural Cooperatives

1 139 504 182


25 135

Village credit unions

13 372 040


3 527

Other cooperatives

132 714 536


128 705

Government fund

18 119 652


8 206

Insurance companies

5 174 100


8 652

Informal lenders

1 265 986 559


16 264

Lenders inside the village

278 815 987


13 457

Lenders from other villages

320 795 295


22 105

Lenders in the district

100 073 152


20 340

Lenders in the province

6 773 433


16 401


480 394 636


14 566

Village funds

144 033


1 000


78 990 023


19 025


6 372 389 618


Source: TDRI' survey, 1996.
In less than a decade, the volume of loans provided by agricultural cooperatives has tripled from 4.4 billion baht ($176 million) in 1988 to 13.8 billion baht ($552 million) in 1995. About 60 percent of the loans are short-term, for one year or less. The rest of the loans are of intermediate term (one to three years), with less than one percent able to be described as long-term.

While macroeconomic figures from the Bank of Thailand (Kittisrikangwan, et al. 1994) indicate that loans from agricultural cooperatives were relatively small (accounting for only 0.5 percent of lending volume in 1994),[6] their lending volume was second only to the BAAC in our surveyed area in Nakorn Ratchasima and third in Nan, after the BAAC and Credit Cooperatives (Tables 3 and 4).


Most agricultural cooperatives take deposits from members in the same manner as commercial banks do with their regular customers. They usually offer both savings and time-deposit accounts. The interest rates provided by most agricultural cooperatives are slightly higher than those of commercial banks, and the interest sums are tax-exempt. Some agricultural cooperatives also attempt to mobilize savings by classifying members according to their savings. Members who are classified in a higher class would be charged a lower borrowing interest rate than those of lower classes.

Table 5 shows the amount of savings at all agricultural cooperatives from 1988 to 1995 as reported by the Department of Cooperative Promotion, Ministry of Agriculture and Cooperatives. The table indicates that savings had increased more than 600 percent during this period. However, figures from the Bank of Thailand (Table 6) indicate that the market share of the agricultural cooperatives regarding total savings in 1993 and 1994 remained unchanged from that of 1989, while the BAAC share had increased substantially during the same period.

Our household surveys in early 1996 suggested that the amount of savings in agricultural cooperatives was less than three percent of total savings in rural Nakorn Ratchasima, but accounted for more than 10 percent of savings in rural Nan, where the amount of savings at agricultural cooperatives was comparable to that of the Government Savings Bank. Most savings were in savings accounts, which were two to four times as much as deposits in time-deposit accounts. While it is possible that depositors prefer savings accounts to time-deposit accounts, a clear sense from the agricultural cooperatives' officials interviewed was that the cooperatives themselves tried to mobilize savings only for savings accounts. This is not surprising since the interest rates the agricultural cooperatives paid for time-deposit accounts were comparable to, or in some cases higher than, the rates they paid for borrowing from the BAAC.[7]

Table 4: Total loans and average size of loans in rural Nan, 1995

Source of loans

Total loans


Average size of loans per contract

Formal lenders

3 225 340 143


22 307


1 406 096 840


13 778

Commercial banks

294 160 417


281 977

Agricultural cooperatives

377 275 286


12 778

Agricultural groups

5 110 000


5 334

Village credit unions

24 816 225


3 851

Other cooperatives

1 117 272 000


256 255

Government funds

609 375


3 000

Informal lenders

76 077 571


9 608

Lenders inside the village

2 784 600


6 000

Lenders from other villages

2 276 400


3 059

Lenders in the district

29 423 950


13 276


10 203 504


5 912

Temple funds

140 000



Village funds

31 249 117


12 559


3 301 417 714


Source: TDRI survey, 1996

Table 5: Savings mobilized by agricultural cooperatives, 1988-1995


Total savings (million baht)

% change

LoansSavings Ratio


1 634




2 382




3 286




3 920




4 360




5 200




7 261




10 409



Source: Cooperative Promotion Department, MOAC.
Selling inputs and machinery

One of the main objectives of the agricultural cooperatives is to acquire and provide farm inputs and machinery to the members at low costs. The premise behind this objective is that, by bypassing the middleman and buying in volume, cooperatives should be able to provide inputs to their members below the market prices (or provide rebates to the members according to their purchases). Sor gor tor is an example of cooperatives that were founded specifically for this purpose.

Table 6: Shares and rates of growth of savings in financial institutions, 1989-1994 (rates of growth in parentheses)

Financial institution







1. Commercial Banks













2. Financial Companies













3. Others













3.1 Government Savings Bank













3.2 BAAC













3.3 Government Housing Bank













3.4 Insurance Companies













3.5 Credit Foncier Companies













3.6 Agricultural Cooperatives













3.7 Thrift & Credit Cooperatives




















Source: Bank of Thailand
Table 7 provides volumes of sales of inputs and machinery by agricultural cooperatives. Sales increased substantially from 1990 and almost doubled in 1994. This increase could be attributed to the foundation of sor gor tor, which takes over this task from the BAAC.

Table 7: Sales of inputs and machinery by agricultural cooperatives, 1988-1995


Sales volume (million baht)

Percentage change


1 151



1 319



1 975



2 349



2 804



3 702



6 437



7 056


Source Cooperative Promotion Department and Department of Cooperative Auditing, MOAC.
Table 8 shows quantities and values of sales by inputs in 1995. Fertilizer, petrol, and machinery were the top three items sold by agricultural cooperatives. Other important items were animal feeds, rice, agricultural tools and insecticides/pesticides. Most of these items are traditional agricultural inputs or staples (rice) in which agricultural cooperatives have comparative advantage in selling, since there is steady demand from their members. The exception is petrol, the majority of which is sold to passers by rather than to members. A majority of petrol sold by agricultural cooperatives comes from Bangchak Company, which has a special programme that gives a better deal to agricultural cooperatives than its regular dealers. Besides selling petrol to agricultural cooperatives at special prices (0.10-0.20 baht per litre below normal prices), Bangchak provides training and technical support on setting up gas stations and accounting systems for the stations. However, one of the most important factors that usually determines the success of a gas station is its location (relative to that of its competitors). While some agricultural cooperatives are very successful with this new business, a number of cooperatives' gas stations in our surveyed areas were far from reaching, and unlikely to reach, that point.

Table 8: Quantities/values of sales of inputs and machinery by agricultural cooperatives, 1995

Type of goods

Total sales

Sales to members


Value (Million Baht)


Value (Million Baht)

Fertilizer ('000 kg)

517 903.38

2 271.72

326 688.93

1 837.15






Machinery ('000)


1 024.02



Agricultural tools










Rice ('000 kg)

34 749.14


20 238.13


Animal feeds





Petrol ('000 litre)

266 575.80

1 122.54

64 409.50









7 056.32


5 437.03

Source: Based on data from the Department of Cooperative Auditing, MOAC.

Table 9: Agricultural products marketed by agricultural cooperatives, 1995


Totalvalue (million baht)

Total value of produce from cooperative members


1 010.48
























1 005.90





Dried chili



Bamboo shoot


















Fattening pigs and sheep







1 186.62

1 004.47





4 156.56

3 45.08

Source: Department of Cooperative Auditing, MOAC.
Gathering produce for resale

A main objective of agricultural cooperatives, the main thrust which is similar to that of selling inputs and machinery, is to gather members' produce and resell it in volume to prospective buyers. Again, the premise is that the cooperatives should be able to do better than a single farmer by bypassing the middleman and dealing in volume. The result, however, is normally not as good as that of selling inputs and machinery.

Naturally, most agricultural cooperatives that engage in this business gather produce that is popular in the area. Most of the produce is gathered from members. However, agricultural cooperatives active in this business also buy a lot of produce from non-member farmers in the areas as well. Table 9 lists values of produce gathered and resold by agricultural cooperatives in 1995. Notably, para-rubber was the produce that agricultural cooperatives bought from non-members more than gathering from their own members. Most para-rubber, however, was handled by para-rubber grower cooperatives, which are the largest ad hoc agricultural cooperatives. In this case, the para-rubber grower cooperatives behave like middlemen (traders) rather than serving the members alone.

However, even when cooperatives gather produce exclusively from their own members, they have to engage in trading businesses and face the same risks as professional traders. Since cooperatives are somewhat amateur in crop marketing, they can hardly compete at the same level as professional traders and often experience substantial losses. Exceptions occur when the produce price is guaranteed by government (e.g. dairy) or where cooperatives hold contracts with a large company (Phimai Agricultural Cooperative, for instance, has a long-term contract to sell rice to the Makro company).

Table 10 shows values of produce gathered by all agricultural cooperatives from 1988 to 1995. Overall value had clearly risen during this period, yet prices fluctuated greatly. This might reflect the nature of agricultural production and marketing, but it might also demonstrate the cooperatives' difficulty with the nature of this business.

Services and extension

Some agricultural cooperatives own farm machinery to service their members, e.g. digging ponds, plowing, etc. Other agricultural cooperatives also provide extension services. However, the volume of service and extension businesses is rather small (usually less than 100 million baht annually). Another important service of cooperatives is providing funeral funds to members. Cooperatives have similar practices as the BAAC in providing such funds, but their funeral funds (and their funeral payments) are normally smaller than those of the BAAC, many members consider this a disadvantage making the agricultural cooperatives less attractive than the BAAC.

Table 10: Value of produce gathered by agricultural cooperatives 1988-1993


Value (million Baht)

Percentage change


1 350



2 073



2 491



3 306



2 846



2 530



3 269



4 157


Source: Cooperative Promotion Department and Department of Cooperative Auditing, MOAC.
Village credit unions (kloom orm sup)

The village credit union (kloom orm sup or savings group) is a small-scale financial institution operated by villagers. In typical groups, each member pledges to save a certain amount of money each month. The members then meet once a month and hand over the pledged money to the group administrator. In most cases, the money is lent out to borrowers on the very same day. Surplus, if any, is then deposited in a bank. Some credit unions also use the savings to run other businesses. Profits from lending and other businesses are then divided among members according to their savings in the union. Most credit unions serve only one village. However, a small number of credit unions have operating areas that cover several villages.

Since 1974, the Department of Community Development (DCD), Ministry of Interior has persuaded villagers in thousands of villages to form village credit unions. It provides guidelines, rules and procedures for the unions to follow. Under its rules, members of each credit union select the administrative committee, which consists of four subcommittees. It also requires all credit unions to register with it. However some successful credit unions, especially in southern Thailand, choose not to register with the DCD because they do not want to be restricted by its rules and regulations. Notably, many village credit unions do not follow its rules on interest rate ceiling. Many unions charge their borrowers two or three percent per month and pay their members higher than commercial bank rates.

The number of village credit unions has increased substantially since their inception in 1974 (see Table 11). By the end of 1995, the number of credit unions was about 11 000 with almost one million members. Table 12 shows the distribution of credit unions by regions. Credit unions in the northeastern and northern regions accounted for almost two-thirds of the unions nationwide. However, large credit unions - both in terms of membership and savings per member - were more common in the southern and western regions.

Table 11: Number of village credit unions, their membership and savings funds, 1974-1995


Number of credit unions

% change

Total members (persons)

% change

Savings Fund (baht)

% change










1 600.0

2 283


666 800





9 136


2 487 220



1 345


64 614


21 130 220



1 584


81 591


44 087 700



2 821


160 055


113 264 000



4 319


278 799


200 133 300



7 167


408 646


317 371 800



8 156


487 601


403 527 300



9 117


595 890


721 411 800


1993 1995

9 949


765 168


1 326 696 201



11 248


884 437


1 837 689 986


Source: Department of Community Development (DCD), Ministry of Interior (MOI).
The fast-growing number of village credit unions gives an impression that credit unions have been very successful. However, there are some reservations regarding this figure. First, the DCD seems to place great emphasis on establishing at least one credit union in each tambon (subdistrict), and often uses the top-down approach to form a union even when the villagers were neither ready nor really supportive. Such unions are usually run by official village administrators with little participation from villagers. Many become inactive and die out eventually. According to one DCD report, during the first quarter of the 1995 budget year, 438 new credit unions were founded. However, during the same period, 319 credit unions (more than 3 percent of credit unions throughout the country) were dissolved. More than half the dissolved unions (172) were in the northeastern region.

Table 12: Number of village credit unions, membership and savings fund by region, 1995


Number of unions

Total members (persons)

Average number of members per union

Savings fund (baht)

Average savings fund per union



56 884


137 151 827

154 974



44 120


101 774 170

168 223


5 837

385 850


412 632 288

70 692


2 106

175 601


159 313 416

75 647



59 192


226 580 537

425 903


1 283

162 790


700 227 748

545 774


11 248

884 437


1 837 679 986

163 378

Source: Based on preliminary data from DCD.
Our field survey found that 15 of 39 villages in Nakorn Ratchasima and nine of 21 villages in Nan had village credit unions (Table 13). Most of these unions were rather small, including two unions in Nakorn Ratchasima with only 10 members each.

Table 13: Village credit unions and membership in the surveyed areas of Nakorn Ratchasima and Nan, 1996


Number of sampled villages

Number of village credit unions

Number of members (persons)

Nakorn Ratchasima




Bua Yai




Choke Chai




Non Soong




Huay Thalaeng








Pak Thong Chai




Seong Sang




Dan Khoon Thod




Wang Nam Kiew




Pak Chong








Na Noi




Ban Luang








Wieng Sa








Source: TDRI survey, 1996.
As stated earlier, the main business of village credit unions is serving as savings and loan institutions. Since 1982, the DCD has encouraged well-established credit unions to participate in other businesses or activities, such as rice mills, rice banks, silos, shops, etc. Some of these activities are welfare-based. For example, some rice banks not only lend their rice but also give some out to poor villagers. However, such extra activities are only supplemental to the main business of savings and loans, which will be discussed in details below.

Savings mobilization

Savings mobilization is the most basic and fundamental business of village credit unions. Success in savings mobilization is therefore a vital indicator of a union's success. Since the main objective of village credit unions (as their Thai name indicates) is to promote regular savings, credit unions require each member to pledge to save a certain amount of money each month. The pledged amount is voluntary and can be as small as 10 baht per month.[8] However, once the member sets the amount, it cannot be changed within a certain time period (usually at least one year). Those who could not live up to their pledges are often viewed as "liers" and are usually not allowed to withdraw their savings until a certain timeframe or conditions are met.

Since almost all village credit unions require members to save on a regular basis, the success of the programme is often determined by villagers' sources and patterns of income. In poor villages or when villagers' income is highly seasonal, such as in many villages in the northeastern region, the failure rate of village credit unions has been higher than in other regions. Conversely, most successful credit unions are in southern Thailand where villagers have rather steady incomes year-round.

While typical pledged amounts are rather small, a credit union has the potential to become a significant financial source of fund within the village. On the savings side, it fills the vacuum in the credit market, since it could gather savings from people who want to or could only save in small amounts. These amounts are so small that they would not be worth a trip to a bank or even to an agricultural cooperative. The banks themselves do not want to deal with small transactions either. However, when these small funds are combined, they are not negligible. A founder of village credit union in southern Thailand pointed out that a union consisting of 100 households (that had about 500 members) could build up a one million baht ($25 000) fund within five years. Many credit unions have funds in the range of six to seven million baht. A few credit unions at the subdistrict level in southern Thailand have savings funds amounting to as much as 40 million baht. Throughout the country, all credit unions had about 1 837 million baht (about $52.5 million) in savings at the end of 1995. About one-half of this amount was lent out or invested in other activities. The other half became "surplus" that was deposited in the banking system.

Lending business

Another main objective of village credit unions is to be a source of credit in the village. Again, credit unions fill a vacuum in the lending aspect of the rural credit markets. Traditionally, lenders in rural credit markets consist of formal institutions and informal lenders. The formal institutions usually charge low interest rates. However, they have little information on individual borrowers and consider lending to small farmers a risky business. Therefore, they usually apply stringent rules of lending and rationing. Informal lenders usually know more of their clientele and are more relaxed on the loan ceiling, but usually charge high interest rates. The village credit unions usually have more information about the villagers than formal lending institutions, and have social sanction mechanism to deal with strategic loan default. At the same time, they charge lower interest rates than informal rates.

According to DCD rules, a new credit union is not allowed to lend money in its first year. Most newly founded credit unions, therefore, deposit their funds at the Krung Thai Bank, BAAC and other commercial banks. Some small credit unions continue to deposit funds in the banks after the first year. As the savings fund grows, unions begin to lend to their members. Credit unions have some rules and regulations for lending. In most cases, a member is eligible to borrow only if she or he has been member in good standing for at least six months. In a new union, sizes of loans are rather small, e.g. 500 or 1000 baht, and usually do not account for more than twice the member's cumulative savings with the union. A large and well-established union is more relaxed about the size of loans. However, when a member borrows more than twice the size of his or her own savings, the union usually requires that the loan be guaranteed by a third party or other forms of collateral, such as land titles.

The duration of loans is usually from three to 12 months. Some credit unions also provide small "emergency loans" payable in one month. Borrowers who fail to repay their loans on time are likely to be denied future loans and may face a financial penalty in terms of higher interest rates as well. Interest rates charged by credit unions range from 1.5 to 5 percent per month. Typical rates reported during our field survey in Nakorn Ratchasima and Nan were 2-3 percent per month. These rates are higher than the rates charged by formal lending institutions, but still lower than the rates charged by informal lenders (3-10 percent per month). In addition, borrowers usually get an "annual dividend" based on the size of their loans.

While credit unions lend to their members year round, Table 14 indicates that loan demand is seasonal. The number of borrowers and the amount of loans from October to January (four months) were more than twice as much as those of the rest of the year combined. Geographically, the number of borrowers and the amount of loans were highest in the South, where credit unions are usually larger than elsewhere (Table 15).

Factors determining success of agricultural cooperatives and village credit unions

In theory both agricultural cooperatives and village credit unions are similar organizations since both are owned by their shareholders who are villagers and supposedly administer themselves through those they elect. The major difference is in the size of the operation. While each general agricultural cooperative covers the whole district, most credit unions cover only one village. Thus, a member of a credit union is more likely to have a self-perception as being as "owner" of the union. The same cannot be said for a cooperative member.

Table 14: Village credit union borrowers and loans, 1 February 1994 to 31 January 1995


Number of borrowers

Total amount of loans (baht)

February-May 1994

40 602

211 120 746

June-September 1994

42 058

147 661 665

October1994-January 1995

188 885

834 431 916


271 545

1 193 216 327

Source: DCD, MOI.
Government offices responsible for promoting agricultural cooperatives and village credit unions usually measure their success by the numbers of cooperatives and unions and their members. If we agreed with this benchmark, we would conclude that both agricultural cooperatives and village credit unions have always been very successful. However, such a conclusion would contradict general perceptions of both types of organizations. While we have seen many successful cooperatives and credit unions, it is difficult to convince the general public and farmers that cooperatives and credit unions have made a great impact on the village economy. It would, however, be useful to learn from successful examples from both organizations and try to elicit their common elements. This section attempts to synthesize results from field surveys and other studies, academic journals, etc., to identify the underlying factors behind success cases.

Table 15: Borrowers and amounts of loans by village credit unions by region, 1995


Number of borrowers (persons)

Total loans (baht)


8 126

48 416 295


6 510

36 760 027


48 325

91 535 728


32 353

105 592 699


22 683

119 346 275


70 888

432 780 892


188 885

834 431 916

Source: Based on data from the DCD, MOI.
Knowledgeable, innovative, benevolent and honest leaders

Most successful cases highlighted in other studies involved knowledgeable and innovative leaders. One example is from a rubber growers' cooperative in southern Thailand. Formed by the leader who was formerly a rubber trader, he learned that most traders' main profit came from false quality assessments, i.e. categorizing rubber sheets they bought in a lower grade than they actually were and thus paying a lower price for them. The cooperative bought rubber sheets at market prices. Unlike many traders, the cooperative did not intentionally falsely assess the produce it bought (Poapongsakorn and Siamwalla, 1995). The cooperative became so successful that many para-rubber growers followed suit. At present, these cooperatives have very good reputation and many non-member rubber-growers prefer to sell their rubber to them. Some of these cooperatives ended up handling more non-members produce than that of their members.

Innovative leaders are also key to the success of many cooperatives, including para-rubber grower and dairy cooperatives. Leaders of these cooperatives found ways to run new activities that could benefit from economies of scale or scope (Poapongsakorn and Siamwalla, 1995). The same could be said for the General Agricultural Cooperative of Phimai District, Nakorn Ratchasima, which has secured a contract to sell high quality rice to a superstore.

Not all cooperative and credit union leaders need to be innovative to lead their organizations to success, since some could follow the successful examples of others. However, they must be knowledgeable and skillful, especially for cooperatives that gather produce for resale, as they have to learn to speculate in the market. In addition, honesty and benevolence are two other necessary characteristics for leaders of these organizations. There were incidents where innovative and knowledgeable leaders used their abilities to their own advantage. Also, many successful credit unions and cooperatives are comprised of skillful leaders who can easily use their skills to personal profit in the business sector, yet willingly dedicate their time to run these organizations (Wongkul, 1996). Many credit unions are run by teachers who use their spare time for the good cause of the organization. They usually gain respect and cooperation from villagers. It should be no surprise that organizations run by these leaders are far more successful than those run by local administrators who were simply chosen by government officials to lead the group.

At present, only 20 percent of cooperatives have professional managers. (Sawetthanand, 1995). Others choose their managers either from members of the cooperative committee or persons from outside having some connection with the president or other committee members. Many receive meager pay. While professional managers do not necessarily outperform able members of the committee, large cooperatives are more likely to hire professional managers.

Member participation, the democratic process and transparent organization

While leaders are obviously an important element of these organizations, group member participation is also valuable to their success. Both agricultural cooperatives and village credit unions have been promoted by government officials who usually adopt top-down management. In particular, the DCD, which is responsible for promoting village credit unions, appears to aim at maximizing the number of unions and their members. The easiest way to found a credit union is to ask the village headman to organize and run it. Most village headmen would then comply as part of their jobs. As for villagers, they hardly refuse to "cooperate" with any request from the government. These unions would then be founded and have a considerable number of members. Some of them would continue to grow and become successful unions. However, many would become inactive and make little impact on the village economy. It is perceived that successful cooperatives and credit unions are also the ones that have high rates of members' participation. According to a study by the Department of Cooperative Promotion in 1979, the General Coperatives of Soong Nern, Nakorn Ratchasima (which was honoured as Thailand's best cooperative in 1974), had very high rate of attendance at its meetings. More than 80 percent of members attended every meeting of the cooperative in one year.

However, Poapongsakorn and Siamwalla (1995) suggest that member participation itself is not sufficient to lead the organization successfully. Participation matters more when members have a strong sense of ownership and believe that their interests could be affected by their participation, or its lack. In this respect, organizational structure and procedures may encourage or discourage participation. An organization that has democratic, transparent and flexible administrative procedures is more likely to attract higher participation than those run by dictated leaders.

An NGO has set guidelines and criteria for evaluation of village credit unions (Kaewnoo, 1996). Many of them involve democracy, transparency, and member participation, i.e.: committee members come from a democratic and transparent procedure and should be subject to re-election; credit unions have standardized and transparent accounting systems; members are allowed to, and participate in, the auditing process and other union activities.

Kaewnoo (1996) also states that the main reason for survival and continued growth of almost all credit unions that the NGO helped found in southern Thailand, is that members are allowed and encouraged to voice their opinions and participate in the unions' administration. This process helped reveal potential problems and allowed the unions to correct them in time.

Optimal scope and scale of operation

Two key issues faced by cooperatives and credit unions are scope and scale of their operations. In this respect, credit unions have more flexibility than agricultural cooperatives, which are restricted by the 1968 Cooperative Law.

The scope of operation of general agricultural cooperatives under guidelines from the MOAC, which view them as multi-purpose cooperatives, has been described. However, not all choose to do all business activities suggested by the MOAC. As for the scale of operation, the government allows only one general agricultural cooperative per district. It should be clear that the most active business of agricultural cooperatives is lending. In fact, many villagers view agricultural cooperatives as public lending institutions. Sawetthanand (1995) found that 87 percent of cooperative members in northeastern Thailand joined cooperatives to borrow from them.

The single-focus objective of these cooperatives may not be as bad as it sounds. While most cooperatives highlighted as successful cases usually have other businesses besides lending, the success of the cooperatives does not always rely on these other businesses. Sawetthanand (1995) points out that cooperatives that attempt to fulfill all the roles prescribed by the MOAC often fail because they lack personnel who can handle these activities simultaneously. In fact, many cooperatives lose money from these businesses - especially in gathering produce for resale-and could report to have positive profits only after deducting these losses from their lending profits. In one respect, cooperatives' lending business is probably easier to manage than other businesses, since most cooperatives can borrow from the BAAC at a low interest rate and this is much easier than relying on their own mobilized savings.

Success of cooperatives that try to fulfill their multiple objectives stems from what economists call "economies of scale," i.e. cost savings from doing many businesses together. Notably, informal lenders in rural areas are often engaged in trading businesses, which could provide them with useful information about their prospective clients. Lending is sometimes used as an instrument to guarantee the borrowers' sale of outputs to lenders. Since each cooperative has full-time personnel and a large membership base, they have a potential to concurrently use these resources for some other businesses. Able and cooperative administrators can make use of these human resources and make their cooperative stand out. However, it would be misleading to conclude that a successful cooperative must be engaged in other businesses besides lending.

As for credit unions, it is even more difficult to expand their businesses beyond savings and loans since they usually have neither full-time administrators nor staff. The DCD has encouraged village credit unions to undertake other businesses or activities, some of which are similar to the main activities, e.g. paddy (rice) bank. Other businesses include operating a silo, processing or production, running a shop, etc. Kaewnoo's (1995) observation is that most of credit union shops are not successful. This is because shop keeping requires considerable management skills, as a shop often buys and sells many goods each day.

Regarding the scale of operation, a major criticism of the government's decision in the late 1960s to limit the number of agricultural cooperatives to one per district is that it has transformed commonly-owned organizations to bureaucratic ones where members have lost their sense of ownership. Sawetthanand (1995) points out that most general cooperatives in Thailand are much larger than cooperatives in Japan, where two-thirds of them consist of less than a thousand members each. He also points out that cooperatives in Thailand have not achieved economies of scale as expected before consolidation. Most of them have continued to be run inefficiently by a small number of administrators who can hardly serve the whole district.

A credit union's size also affects its operation. Some newly founded credit unions are unable to lend to their members because they have miniscule funds. These unions deposit their savings at the BAAC or commercial banks instead. Since returns on such investment are relatively low, especially when compared to interest rates most villagers pay in the informal market, many members find the unions unattractive and gradually abandon them. A few credit unions studied in Nakorn Ratchasima (Pakthongchai, Bua Yai, and Seong Sang) appeared to fit this description. At the other extreme, some credit unions in southern Thailand are very large. Some operate at the tambon (subdistrict) level, which consists of several villages. While these credit unions do not suffer from a lack of funds, they face other problems. One village credit union strength is that members usually live nearby and know one another rather well. In this setting, not only do unions have low information and marketing costs, but also enforcement costs can be minimized, e.g. social sanctions are still effective in dealing with untrustworthy members. When a union expands its operating area geographically, it gradually loses this strength. Many unions find that size brings problems: organizing a meeting becomes increasingly difficult. In other words, they face diseconomies of scale. As a result, some credit unions in southern Thailand originally founded as tambon-level credit unions later decentralized (or disintegrated) in such a way that each village had its own committee and operated on its own (Kaewnoo, 1996).

Rural economy with steady income

Success of credit unions depends heavily on their economic base. This is because credit unions require each member to deposit an equal sum of money he or she pledges to the union each month. Therefore, the amount that a member pledges to save normally does not exceed the amount one anticipates to save in the month of lowest income. Therefore, if most villagers' incomes are highly seasonal, village credit unions are unlikely to raise a large amount of savings.

Poapongsakorn and Siamwalla (1995) point out that Thailand's most successful credit unions are in para-rubber areas in the southern region. In other regions, successful unions are often in tree-crop areas or in areas where activities generate steady income flows. Conversely, credit unions are not very successful in the Northeast because most villagers are engaged in annual crops that generate income once or twice a year. Although many turn to non-farm employment during the dry season, most such jobs are outside the village, which prevents them from joining the union on a regular basis. Our field surveys in Nakorn Ratchasima and Nan seem to confirm this hypothesis.

Naruemol (1995) found that vegetable and mushroom growing and vending are major sources of income for members of successful credit unions in Saraburi province. Many members also have supplementary income from coconut and livestock. In sum, most members have year-round incomes.

Governmental policies and political involvement

While it is undeniable that the government has been a major catalyst in founding most agricultural cooperatives and village credit unions, the manner in which the government "promotes" these organizations has also led them to many failures. One major cause of failures has been the top-down approach in founding these organizations. Often, "self help organizations" are founded not because local people want them, but because government officials try to promote them. Once an organization is founded prematurely and without a clear sense of local ownership, government officials, who are under pressure to keep the organization alive, have to intervene and set rules, regulations, and procedures for the organization. Under this top-down approach, rules and regulations are usually taken out from a blueprint rather than taking into account local settings or historical backgrounds.

This approach has caused problems in many credit unions founded by the DCD. The DCD requires that each credit union form all four sub-committees before operating on a full scale. It also requires that new credit unions deposit all of their first-year savings in a bank. Furthermore, it sets ceiling for the lending rate at 1.5 per month. Many successful credit unions in the South therefore choose not to register with the DCD.

Many agricultural cooperatives are also founded in a hurry, as some MOAC officials attempt to maximize the number of cooperatives and members. Sawetthanand (1995) points out that this recruiting process has created the cooperatives' image as a governmental source of cheap loans, which is now difficult to change.

Agricultural cooperatives are more involved in politics than credit unions are. This is in part because cooperatives are large organizations that would naturally attract politicians. Some cooperatives also seek out, and benefit from, politicians' involvement. For example, a para-rubber grower cooperative in southern Thailand asked a politician to channel 43 million baht to fund its rubber sheet plant. Similarly, the General Agricultural Cooperative of Phimai, Nakorn Ratchasima obtained its long-term contract to sell rice to the Makro company by asking for assistance from a politician. In fact, many cooperatives prefer to choose local politicians or someone who has good political connections to run the cooperatives. However, political connection does not always benefit cooperatives since financial assistance that come from this channel often has strings attached. Moreover, simply getting cheap funds does not guarantee the success of projects or cooperatives. Successful cooperatives are the ones that have well-designed and well-implemented projects to go with the funding.


Since the first cooperative was founded more than 80 years ago, agricultural cooperatives have expanded substantially, both in number of cooperatives and members. In 1996, more than four million households were members of agricultural cooperatives. Their success or failure would, therefore, invariably affect rural lives.

Village or subdistrict level credit unions are newer and smaller organizations which fill the gap between the formal and informal financial sectors in rural areas. Their numbers have increased sharply and there are now more than ten thousand village credit unions in rural Thailand. While most agricultural cooperatives are multi-purpose, their major role has been obtaining funds from the BAAC to re-lend to their members. Village credit unions mobilize savings from their own members and usually re-lend the money within the village.

Both organizations' main activity is that of a financial intermediary, but their roles are quite limited in the rural financial market. Cooperatives rely heavily on BAAC money, so it is hard for them to compete with the BAAC, although their recent savings mobilization has been more successful. Credit unions rely on their own savings fund, but for most, however, their loanable funds are too small to be a reliable source of working capital for the whole village (or even a significant part of the village). Therefore, they too are not in a position to compete with the BAAC. However, they can compete with or replace informal lenders and help in driving down the informal interest rates.

While government's promotion was crucial in founding many of these organizations, government intervention often bars them from achieving their fullest potential. A cooperative law amendment in the late 1960s, which consolidated small cooperatives into general agricultural cooperatives, transformed some cooperatives into bureaucratic organizations where members lost their sense of ownership. An attempt to set up credit unions at a subdistrict level had similar consequences. The DCD blueprint for credit unions, which attempts to set up credit unions the same way throughout the country, may impede their growth rather than promoting them.


Kaewnoo. 1996. 44 lessons learned from promoting savings groups (Thai), Lae Tai, 7(33): 17-29.

Kittisrikangwan, P., Supapongse, M. & Jantarngs, J. 1994. Monetary policy management in Thailand, Academic Papers BE 2537, Bangkok, Bank of Thailand.

Naruemol, R. 1995. Factors determining the success of savings groups in rural savings mobilization: a case study at the village level in Saraburi province, Faculty of Economics, Thammasat University, Bangkok (MA thesis).

Poapongsakorn, N. & Siamwalla, A. 1995. Rural people's organizations: success and survival (Thai), Report No. 1, Year-end conference on participation, Bangkok, Thailand Development Research Institute.

Sawetthanand, P. 1995. Economics of cooperatives (Thai). Bangkok, Chulalongkorn University Press.

Wongkul, P. 1996. Weather the capitalism crisis in the era of globalization: moral economics and community sovereignty (Thai). Bangkok. Amarin Academic Press.

9 Decentralized rural development and the role of self help organizations, Mrs Wannee Ratanawaraha, Thailand

Agricultural cooperatives have been recognized by the government as instruments for increasing the bargaining power of farmers, generating income and improving their quality of life. The government, therefore, laid down the policy to improve farm production through cooperatives. At the same time, cooperatives must be strengthened to increase their efficiency managing cooperative enterprises. The difficult task of the cooperative enterprise is competition in marketing. Government must provide some aid to overcome problems, which cannot be solved with only local resources.

Aid and support has been given to the cooperatives in accordance with their capability and their behavior in cooperative operation. Cooperatives will be assisted in finance, marketing facilities infrastructure improvement, research, education and training. Government also provides managerial assistance and auditing of their financial statements. Plans for cooperative development are designed by cooperative committees and district cooperative officers. Cooperatives are free to decide whether they will join government development projects or not. Before implementation, district and provincial cooperative officers consult with cooperative committees and staff to clarify the implementation process. Guiding and monitoring cooperative projects is done by local offices at district and provincial levels. Local offices are the agencies for transferring information and technology to cooperatives and also for receiving opinions, information and even problems from the cooperatives to [forward] to the Cooperative Promotion Department. Government officers in local areas will act as consultants to the cooperative societies.

Growth and success

The growth and success of cooperatives can be seen from the fact that: the number of cooperatives has increased at an average annual rate of 9 percent; membership has been increasing at an average rate of 8 percent; There are 533 "first grade" cooperatives, i.e. some 15 percent of agricultural cooperatives; business has grown 14 percent to a total value of 51 million baht ($1.5 million) in 1997.

Agricultural cooperatives in Thailand still need external resources to strengthen their efficiency in providing services to members. If cooperatives cannot fulfill member needs, member participation in cooperative activities will certainly be poor. The right amounts of external aid, promotion and timing during which promotion can be done, depends on the stage of development and local conditions. It cannot be calculated in advance but can only be determined from time to time on a case by case basis. However, knowledge and information about successful cooperatives should be spread to encourage imitation and replication by other cooperatives. What is even more important is to create a network of cooperatives to strengthen the efficiency of the cooperative movement as a whole.

Decentralized rural development and the role of self help organizations

Thailand can be called an agricultural country because 36 percent of total land is farmland. Paddy is the main crop and paddy land is about 56 percent of all farmland. The population in the agricultural sector in 1996 was about 24 million, some 41 percent of the total population. The average net cash farm income for the whole kingdom is about 11 230 baht per farm per crop year. The highest income realized is 19 300 baht in the central region and the lowest is 6 063 baht in the northeast. The agricultural sector contributes about 17 percent of GDP.

Cooperatives organized in rural areas are agricultural cooperatives organized to: strengthen the bargaining power of rural people in purchasing farm supplies and marketing farm produce and commodities; build up the cooperatives funds by encouraging savings among members and promoting group deposits; provide credit for farming and production; transfer agricultural technology to members; provide land and water development services; and educate and train cooperative members and staff.

After the first cooperative was established in 1916, the government agency directly concerned with promoting cooperatives was expanded from being a section in the Ministry of Finance to become the Cooperative Department in 1920. In 1952 it became the Ministry of Cooperatives which in 1963 became the Ministry of National Development with the Cooperative Department attached to the new ministry. A reorganization of government agencies in October 1972 resulted in merging all departments concerned with cooperative promotion into the present Cooperative Promotion Department under the Ministry of Agriculture and Cooperatives.

Functions and responsibilities

The functions and responsibilities of the Cooperative Promotion Department include: to promote and disseminate cooperative ideology, principles and practices to the public, as well as to produce publications and cooperative magazines; to study and conduct research on cooperatives and to provide cooperative education and training; to guide and promote the organization and business operation of cooperatives; to assist cooperatives and cooperate with other agencies so that cooperatives will receive both technical and financial support and other necessary services to enable them to be genuinely self-reliant organizations; to consolidate and allot land to landless farmers following cooperative practices;to supervise cooperatives to operate according to the Cooperative Act, regulations, by-laws and orders of the Cooperative Registrar.

Mission and objectives of the Cooperative Promotion Department

The mission of the Cooperative Promotion Department (CPD) is to promote and develop cooperative members and all other people, to constantly increase their incomes, to be self-reliant and have better quality of life by cooperative practice, resulting in the development of social, economic and democratic life in the country as a whole.

The objectives of the CPD are to increase knowledge and understanding of cooperative ideology of cooperative members and others in order to get more informed involvement; strengthen the cooperative's capability for competition; build up cooperatives as the base for social, economic and democratic development; create cooperation among government agencies, cooperatives and the private sector to support cooperative enterprises; and develop systems and methods of cooperative promotion to be more decentralized and participatory from all parties concerned at all levels.

National policies

The cooperative system has been considered an important means for social and economic development of low-income people. In Thailand's new constitution (1997) two articles specifically mention cooperatives. Article 45 states that: Everyone has the liberty to join together and organize associations, federations, unions, cooperatives, farmers groups, non-governmental organization and any other group. Article 85 states that: the State must promote, support and protect cooperative systems. The policies of the present government have been relevant to the constitution by increasing funds disbursed to farmers through cooperative systems to reduce production costs in the form of interest charge from non-institutional loans and supporting more systematic transfer of technology, data and information to cooperatives and to create learning centres in the community, so that farmers will be self-reliant in producing, marketing and processing their commodities.


The Cooperative Promotion Department formulated its implementation plan to serve government policies as follows. The CPD develops cooperative data and information systems to increase production, improve commodity quality, develop production and marketing techniques and to provide help in case of natural disaster or a price slump; promotes and supports cooperatives; establishes cooperative markets to sell, purchase and distribute agricultural inputs and consumer goods; supports private agencies in business administration and management in the cooperatives; establishes a network of cooperatives to strengthen mutual cooperation; launches a campaign with the cooperatives to encourage member savings to build their funds.

Major projects through cooperatives

Agricultural cooperatives have been used as a mechanism for rural people to interact and participate in decision-making for food security, sustainable rural development and poverty alleviation. The major projects include:

Hygienic fruit and vegetable production Eleven cooperatives in eight provinces were selected for a hygienic and non-toxic fruit and vegetable production project. They were provided production inputs for 762 plots totaling 381 rai. Members growing vegetables were trained in proper cultivation techniques, resulting in healthy vegetables for consumers and safe cultivation for the producers - without environmental contamination from chemicals.

Production and distribution of 'hom mali' rice Implemented in seven provinces, through 88 cooperatives with 15 000 members on a total land area of 266 000 rai, this project has an expected yield of 66 650 tons of "hom mali" (jasmine) rice paddy, to be processed into 26 660 tons of fine jasmine rice. Benefits expected are increasing members' income and the quality and quantity of hom mali rice for export, improved rice cultivation, etc.

Dairy cooperative development By improving conventional dairy farming technology the project increases domestic milk production to meet growing milk consumption and reduce imports. The project has made a major impact on cooperative staff and members who were trained by improving their dairy farming practice. They can perform and teach dairy farming techniques to other members. The number of dairy farms increased from 155 to 233 within five years. The number of dairy animals and quantity of milk production also increased from 1 700 head to 3 113 head and 1 736 tons per year to 4 467 tons per year respectively.

Establishment of cooperative marketing centres

The government had supported marketing systems in agricultural cooperatives by allocating certain amount of budget for the construction of a marketing centre at subdistrict level, and providing necessary marketing facilities such as weighing machines, drying machines and others. The government support will be on the condition that the cooperatives have to contribute some of their own fund to complete the marketing centre.

The marketing centre will be the place for selling and purchasing agricultural produce at the prices agreeable between cooperative members and traders. The cooperative will help in price announcement, to coordinate in price negotiation and to provide services, which can facilitate both members and traders. In addition, the cooperative will buy commodities from the members if they are not satisfied by the price offered by traders.

At present, there are 580 marketing centres in operation; the volume of commodities purchased by cooperatives is 582 million tons, valued at 3 515 million baht. The volume for which cooperatives provide services at the centre are 1 238 million tons with a value of 6 808 million baht.

Through the cooperative marketing centre, the members can sell their commodities at prices higher than those obtained by other farmers, e.g. with paddy, members can get 100-200 baht per ton more. Besides, farmers who sell through the marketing centre that can be assured of fair weight and the centre also creates employment for local people.

Farm ponds and integrated farming system

To achieve integrated farming sustems, farm ponds with 1 260 m3 total capacity were dug in water shortage areas. Up to 1997, the number of farm ponds provided to cooperative members was 55 854. These ponds were used for integrated farming. Each family earned more income, on average 14 300 baht per year, and the family could be assured of additional food crops through their ponds.

Improved efficiency and quality of agricultural produce

To improve the efficiency and quality of agricutural produce, a project was initiated to assist farmers to increase yield of rice and soybean by using improved seeds produced by cooperatives. The cooperatives operate seed improvement plants provided by the government. Cooperative staff and members are trained to operate the plant and to cultivate the seeds.

All projects mentioned above were considered and approved by the board of directors of cooperatives. The projects are implemented through collaboration between cooperatives and local government at provincial and district levels by the Cooperative Promotion Department. Cooperative Promotion Officers at district level work closely with cooperative committees and staff as consultants. However, decisions are made exclusively by cooperative committees or by general meetings of members.

There is a need in agricultural cooperatives for external aid to overcome problems which cannot be solved only with local resources. Therefore, the government must provide some resources to help cooperative efficiency and encouraging participation of the members.

Laws and regulations

Cooperative societies in Thailand operate under the Cooperative Society Act B.E. 2511 (1968). Since the act was promulgated some 30 years ago, there are now several points not suitable for the present situation and which in fact hinder cooperative development. Amendments were proposed to the act, so that it is due to be replaced by the Cooperative Society Act B.E.2541 (1998).

The new Cooperative Society Act will promote participatory decentralized rural development. Its most important points are the establishment of a National Cooperative Development Committee and an Executive Committee for the Cooperative Development Fund. Representatives from the cooperative movement will have seats on both committees. The cooperative representatives can have a voice in making policies and plans for cooperative development and executing the Cooperative Development Fund to benefit cooperatives and their members. On the other hand, the new act will not allow board members to serve more than two consecutive terms, though they can qualify for re-election after one year. The new Act empowers the Cooperative Registrar to remove a director or an entire board of directors if they are found to have acted against and damaged the cooperative or member benefits. However, the government has gradually minimized its role in approving rules and regulations by handing over these to the general meeting and board decisions.

Conclusions and recommendation

The Cooperative Promotion Department, as the agency for promoting development of self-reliant cooperatives must work through a combination of instruments needing to be applied simultaneously.

The exact combination of instruments, the right measure of external promotion and the optimal period during which such promotion should be given (to avoid negative effects of under- or over-promotion) depends on the stage of development and local conditions, which cannot be calculated in advance, but can only be determined on a case by case basis.

Therefore, we offer the following points and recommendations:

Cooperative types/membership by agricultural and non-agricultural groups 1998

Type of cooperatives

Number of Cooperatives

Membership (persons/households)

Whole Kingdom

5 367

7 623 600

Agricultural cooperative group

3 398

4 659 373

Agricultural cooperative

3 226

4 507 082

Fisheries cooperative


12 215

Land settlement cooperative


140 076

Non-agricultural cooperative group

1 969

2 964 227

Thrift and credit cooperative

1 244

2 067 022

Consumer cooperative


781 373

Service cooperative


115 832

[1] Chief, Foreign Relations Sub-Division, Division of Planning, Department of Agricultural Extension (DOAE), Royal Thai Government.
[2] Thammasat University and the Thailand Development Research Institute (TDRI) respectively.
[3] First published in Rural Finance in Thailand 1996, Thailand Development Research Institute.
[4] BAAC’s Agricultural Cooperatives for Marketing (sor gor tor) was founded and promoted to absorb BAAC input sales units. With almost all BAAC customers as members it has the largest agricultural cooperative membership.
[5] Before 1980, BAAC forced borrowers to put a portion of the loan into his/her BAAC savings account.
[6] It should be noted that the BAAC share was only 2.1 percent of total loans in Thailand.
[7] The BAAC (at least in Korat and Nan) also tried to persuade farmers to place their money in savings rather than in time-deposit accounts.
[8] In our survey in Nakorn Ratchasima and Nan, most member pledges ranged from 20 to 50 baht per month.

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