Team touts use of trees as loan collateral

The Business Development Department, in collaboration with the Bank for Agriculture and Agricultural Cooperatives (BAAC), is driving an initiative to use perennial trees as collateral for business loans.
The effort aims to provide farmers and entrepreneurs with greater access to finance by leveraging the value of their natural resources.
Perennial trees can be utilised not only as collateral, but also as assets to generate future income, such as selling carbon credits, while contributing to forest conservation to mitigate natural disasters, which have been increasing in Thailand.
Speaking after presiding over the “Promoting Perennial Trees as Business Collateral” event held recently at the Village Wisdom Center in Ban Lao Ma La Ko, Thung Luang subdistrict in Ratchaburi province, Auramon Supthaweethum, director-general of the department, said the initiative aligns with government policies to expand financial access, particularly for farmers, who play a critical role in driving the grassroots economy.
By using perennial trees as business collateral, farmers can expand their businesses, increase income, and improve their quality of life sustainably, while also participating in national economic development and forest conservation, especially after the severe natural disasters, including large-scale floods, apparently caused by deforestation.
This year, the department has visited Chiang Rai and Ratchaburi, with plans to expand the initiative to all regions of Thailand next year. In partnership with the BAAC, the department will organise activities to promote the use of perennial trees as business collateral, involving legal experts in business collateral law and experts from the Tree Bank Project.
These activities will provide farmers with knowledge about the laws governing business collateral and details on how trees grown on their land can be used as loan collateral with the BAAC. They will also demonstrate how to assess the value of perennial trees and evaluate the carbon credits stored by the trees to create additional value, Mrs Auramon said.
“Perennial trees can be used as collateral for business loans without the need to cut them down or destroy forests, while also generating future income, such as selling carbon credits,” she said. “Carbon credits are becoming a global commodity as businesses around the world aim to offset their greenhouse gas emissions, aligning with the global shift towards a green economy.”
According to Mrs Auramon, the BAAC is working with local administrative organisations to help explain the benefits of tree planting and conservation efforts.
The BAAC aims to purchase about 500,000 tonnes of carbon credits over the next five years, with the price set at 3,000 baht per tonne.
“The department and the BAAC will educate farmers on future business trends, allowing the initiative to expand to other provinces across the country. This project represents a significant step in promoting equal opportunities for Thai farmers and ensuring sustainability in the forestry sector,” she said.
“Promoting the use of all types of perennial trees as business collateral for farmers supports the development of the grassroots economy, while also encouraging the conservation of natural resources.”
As of Sept 30, 159,761 trees have been registered as business collateral across 26 provinces, with a total collateral value of 164 million baht. Farmers in Ratchaburi have already used perennial trees as collateral with the BAAC.
The Secured Transactions Act, allowing the use of perennial trees as loan collateral, has been in effect since July 2, 2016, with the Commerce Ministry issuing ministerial regulations in 2018 to permit this practice.
All types of perennial trees can be used as collateral, following an amendment in 2019, which removed the previous limitation of only 58 types of trees.
However, the trees must be grown on privately owned land, and trees grown on Sor Por Kor agricultural reform land cannot yet be used as collateral.