Agricultural Bank Reveals Debt Crisis: Over 400,000 Farmers Trapped Paying Interest Only
Over 400,000 Thai farmers are trapped in a debt crisis with the Bank for Agriculture and Agricultural Cooperatives, paying only interest while principal remains unpayable due to insufficient income and poor payment structures.
On May 5, 2025, Somratsmi Chantarat, Director of the Puey Ungphakorn Institute for Economic Research, revealed that household debt—particularly among Thai farmers—is spreading and deepening into an accumulated crisis spanning more than three years. The Puey Ungphakorn Institute for Economic Research (PIER) has been collecting data jointly with the Bank for Agriculture and Agricultural Cooperatives (BAAC) to analyze solutions.
The data shows that if assessed solely by non-performing loan figures alone, the true severity of the farmer debt problem may not be apparent, as previous relief measures have continuously supported borrowers' status. However, in-depth analysis of approximately 3.97 million agricultural borrowers over the past decade reveals concerning trends: farmer debt has surged across all borrower categories, with median debt rising from 200,000 to 250,000 baht—three times higher than other household groups. Over 30% of borrowers have seen debt double in eight years, and over 30% are carrying debt exceeding half a million baht.
Trapped Paying Interest Without Closing Debt
Chantarat noted that the true crisis lies hidden in spending behavior: borrowers paying only interest rather than principal. This has become the predominant debt repayment culture among the country's farmers. Over the past eight years, those paying only interest rapidly increased from 20% to over half, while merely 10% of borrowers can consistently pay down the principal. Without targeted intervention, over half of agricultural borrowers face the prospect of being permanently trapped in unpayable debt, which will undermine the long-term development potential of Thai farming households and the agricultural sector.
Insufficient Income Declining Annually
Chantarat stated that limited capacity and income are major obstacles. Approximately 42% of agricultural borrowers have insufficient remaining income to service debt and face the risk of declining income every three years. When debt accumulates beyond capacity, available income is used solely to pay interest, making principal reduction impossible.
They also face hidden transaction costs from poor matching between annual payment schedules and actual income cycles. This causes approximately 65% of farmers' income—which arrives more frequently and from multiple sources—to not be efficiently allocated to debt repayment. Combined with transaction costs of 300-1,000 baht per visit to branch offices, small remaining monthly payments become uneconomical.
Fastening the First Button Correctly
Chantarat emphasized that past short-term relief measures represent a critical gap that has frozen the debt problem. Over the eight years, most measures focused on debt suspension and payment postponement to prevent non-performing status, currently covering 45% of borrowers and applied broadly even to capable groups. Beyond being an inefficient use of resources, this distorts incentives and undermines financial discipline.
Meanwhile, debt restructuring aligned with capacity—to unlock principal repayment—remains limited to groups with excessive debt. The policy gap must be closed through transitioning to long-term measures that fasten the first button correctly: restructuring debt to match capacity, reducing debt burden conditionally, and shifting from short-term relief measures.
