What is Credit Foncier ?

     The economic and financial crisis that rocked France at the end of 1840s was partly responsible for the fall of the July Monarchy, which made sluggish domestic trade and lack of capitals to operate the business. Therefore, Louis Wolowski was initiated a Crédit Foncier business (English: landed credit). Later on the French Government realized the importance of this business and supported the establishment of “Crédit Foncier de France” in 1816. The Crédit Foncier de France provided mortgage loan by using house or land as collateral with low interest and long term agreement. In 1820, it was extended its business by providing housing loans to public and financing government to construct public infrastructure. Moreover, Crédit Foncier de France offered loans by purchasing rediscount promissory notes from contractors with completed construction phase or construction in process as collateral for the loan.

In Thaland, the Credit Foncier business has been existing for a long time, but it is not widely recognize among the public. In the past, Credit Foncier business were operated by company or limited partnership to build house and allocate land for sale to public in the form of installment payment or provide mortgage loans with land or house as collateral, however the public recognized this business in the name of installment real estate.

In 1924, government legislated to regulate on land and mortgage loan, Civil and Commercial Code, Section 1014, dated January 1, 1924, which prohibited the limited partnership or limited company to do railway, banking and mortgage business unless granted royal permission, but did not prohibit individual to loan by mortgaging property, at this period of time there was no official name for Credit Foncier. Later on the Government legislated the control of trading activities that affect public safety and welfare act, 1928 and terminated the, Civil and Commercial Code, Section 1014, 1924, thus the term “Credit Foncier” appear as mentioned “prohibit the operation of warehouse insurance, saving bank, Credit Foncier or similar businesses in Thailand”, however, there was no clear meaning description of the Credit Foncier Business. On May 22, 1942, the Ministry of Finance was announced the description of Credit Foncier Business and opened for those who already operating or willing to operate this business to register as limited company in order to apply for a license, but there was only 1 registrant in 1958. However, there were many companies operate this business without permission, as the result the public had suffered from these companies, such as the borrower competed the payment, but the lender was not transfer the ownership of the property. Therefore in 1972, The National Executive Council assigned all the companies that operate in Credit Foncier business to register as Credit Foncier Limited.

The Business Act for Finance Business and Credit Foncier Business, was announced in 1979 as regulation to control these businesses. The Credit Foncier Business was regulated under Ministry of Finance and Bank of Thailand announcement according to the notification No.58 of National Executive Council dated January 26, 1972. The notification is associated with regulation of general trading business which was not tightened enough, thus the related parties were disadvantage and not well protected. Therefore, there should be a law to regulate such business in order to protect interests of related parties effectively.

Currently, such act was canceled and replaced with the Financial Institution Act, 2008, which is the laws that regulate financial institution. The financial institution includes Commercial Banking, Finance Company, Credit Foncier and specialized financial institutions. Such Act describes the Credit Foncier as business that can receive money as deposit from the public and repay at maturity, Credit Foncier can utilize the money in either of the following
(1) Loans by mortgage real estate as collateral
(2) Purchase property with a right of redemption

Learn more about credit foncier at Capital Link Credit Foncier Limited