Bank for Agriculture and Agricultural Cooperatives (BAAC), Thailand

BAAC has come to be internationally recognised as one of the few specialised, government-owned rural finance institutions which has been successful in carrying out its mandate without government subsidies. Its loan outreach to Thailand’s rural poor and its savings mobilisation performance are impressive. This case study reviews the macroeconomic and financial sector context of the bank and undertakes a substantial institutional analysis.

Exploiting the comparative advantage of its branch network and the already close links it had developed with its client population through lending programmes, BAAC developed its deposit base remarkably quickly, providing both standard and tailor-made savings instruments to its clients. BAAC has demonstrated to other Thai institutions that lending in rural areas can be a profitable activity, thus encouraging an increase in lending by other banks.

The author suggests that the focus of BAAC’s management on the “bottom”line and a corporate culture that recognises and rewards cost effectiveness and efficiency are principal elements in accounting for BAAC’s relative success as a financial institution despite its character as a state-owned bank.

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