Farmers in Chiang Rai to be educated on use of perennial trees as collateral

The partnership, which commenced on Friday, stems from the lack of knowledge among many farmers across the country that they already have a valuable asset that can be used as collateral for loans. 

The department director-general, Oramon Sapthaweetham, presided over the event's opening ceremony. She explained that though perennial trees had been accepted as collateral for many years, only farmers in 22 provinces across the country had applied for the programme thus far.

She explained that many farmers appeared to be unaware of this option, which prompted the department that operates under the Commerce Ministry, to work with the BACC to raise awareness about this programme. 

The one-day activity included two sessions: training and a special discussion with experts. 

The training covered a variety of topics, including the tree bank project, loan applications using perennial trees as collateral, forest sector carbon credits, and business collateral laws.

Meanwhile, the discussion included a talk on "Perennial trees, business collateral, and environmental friendliness", with experts from various government agencies and local farmers participating. 

"We expect the initiative to raise awareness among farmers about the benefits of planting perennial trees and using them as collateral for loans while adhering to the green practices trend. This will not only help farmers get through their financial difficulties, but it will also support the government's commitment to sustainable development goals and strengthen the country's potential in the carbon credit industry," she said, adding that the initiative will expand to other communities. 

Oramon highlighted the significance of this initiative, especially in light of the government's focus on sustainable agriculture and environmental conservation. By planting perennial trees and using them as collateral, farmers could generate additional income and contribute to a greener future, she said.

"The initiative also aims to improve farmers' skills in the carbon credit industry. Perennial trees can act as carbon sinks, potentially producing carbon credits that can be sold to industries seeking to offset their greenhouse gas emissions. This is consistent with global trends in environmental sustainability and provides farmers with an additional revenue stream," she explained. 

Pattanapong Niammeesri, assistant director of BAAC Customer and Community Development Department, noted that this approach aims to create a more flexible financial system that allows businesses and farmers to leverage their existing assets for growth and development, while also promoting environmental conservation and sustainable practices.

When farmers offer perennial trees as collateral, the BAAC would determine their value, he said, adding the bank could determine the durability and strength of a tree by measuring its circumference and inspecting its appearance. It would then help with the registration at the Department of Business Development before proceeding with the loan.

The amount and interest rate will vary depending on which loan programme the farmer applies for.

"We welcome perennials in all areas. However, it must be on legal property, not encroaching on forests. The BAAC will monitor and inspect the tree insurance every three years to ensure it remains in good condition. Throughout the process of submitting collateral. Farmers can fully utilise such trees by harvesting fruits, flowers, propagating seedlings, and so on. Farmers typically apply for loans for a period of 10-15 years, with the main reason being to purchase fertiliser for the upcoming production," Pattabapong said.

The bank has processes in place to help borrowers who are experiencing difficulties and are at risk of defaulting on debt payments, he explained. These include options for deferment and extending the instalment payment period. 

Meanwhile, the bank will create tailored solutions for each case. Furthermore, if the tree used as collateral dies, the loan holder may replace it with other perennial plants on their property, he said.

As of July 31, 154,470 trees had been registered as business collateral for a total of 145 billion baht, representing 0.001% of total collateral assets. 

Currently, 22 provinces have participated in the programme, the majority from the Northeast. Only four of the northern region's 17 provinces have attended, and Chiang Rai has yet to participate despite farmers in the area owning plenty of perennial trees.