The Bank for Agriculture and Agricultural Cooperatives (BAAC) reveals 5 challenges facing the bank over the next 3 years.

Six state-owned banks unveil their strategic plans for 2026, continuing their mission to support government policies. Virtual banks are not competitors; they are preparing to develop technology to cope, moving forward with the use of AI to enhance the capabilities of banks and help people access financial services, while striving for sustainability.

WhyMr. Chatchai Sirilai, Manager, Bank for Agriculture and Agricultural Cooperatives (BAAC). It was revealed that 2026 marks a crucial strategic milestone for the Bank for Agriculture and Agricultural Cooperatives (BAAC) in achieving its medium-term strategic goal (2026-2028): to become a modern rural financial bank. This is happening amidst a changing financial and agricultural landscape, presenting both opportunities and challenges for BAAC in five key areas. These challenges act as both pressures and the catalysts for new growth, provided the timing is right, as follows:

1. Super-aging societyHyper-Aged Society This is the most severe structural impact, as the average age of BAAC's farmer customer base is increasing (currently 61 years old), resulting in decreased productivity. Meanwhile, there aren't enough new generation farmers entering the agricultural sector, creating risks in both non-performing loans and a lack of succession, affecting the long-term sustainability of the loan portfolio.

However, despite the presence of elderly individuals lacking income, there is still a group of elderly people with purchasing power who are health-conscious. This group may also include other age groups with a tendency to consume health-related products. The demand for safe food, health herbs, and wellness tourism is also growing. The Bank for Agriculture and Agricultural Cooperatives (BAAC) can support its farmer customers in adding value to their produce to move towards high-value agriculture for this market, as well as upgrading homestays to create new income for communities.

2. Climate volatility (Climate Volatility) The impacts of global warming are not a distant issue. For the agricultural sector, it directly affects credit risk. Prolonged droughts or flash floods destroy crops and unintentionally cause farmers to default on their loans, resulting in higher loan loss provisions for banks, while interest income on loans fluctuates according to weather conditions.

However, while climate change is an unavoidable risk, the world is moving towards a way out of this crisis, presenting an opportunity for BAAC (Bank for Agriculture and Agricultural Cooperatives), as a sustainable rural development bank and with a network of community tree banks—the largest source of forestry carbon credits in Thailand. This is because businesses worldwide and in Thailand are striving for net-zero greenhouse gas emissions, and there may be a need to purchase carbon credits to offset these emissions.

"Therefore, the Bank for Agriculture and Agricultural Cooperatives (BAAC) is not just a lender, but also has the opportunity to transform itself into a collector and seller of carbon credits, generating new forms of fee income."

3. Debt problems and inequality (Debt & Inequality) The critical level of agricultural household debt acts as a ceiling suppressing new loan growth. Banks find it difficult to expand lending because farmer customers have limitations in their ability to repay debt relative to their income. Furthermore, inequality creates a large number of vulnerable customer groups, which have high management costs and high risks.

4. Digital economy and AI (Digital & AI Economy) Changing consumer behavior regarding financial services means that competitors are not just banks, but also non-bank service providers who can reach customers faster and at lower costs.

If the Bank for Agriculture and Agricultural Cooperatives (BAAC) is slow to adapt, it will lose market share in retail loans and fee income to new players. However, in a highly competitive environment, digital technology can be a key to unlocking BAAC's ability to reach more technology-savvy young farmers (Young Smart Farmers), as more young people return to their hometowns to engage in agriculture. These individuals need convenient and quick access to funding without having to travel to branches.

5. The New World OrderGeopolitical Conflict) Global conflicts impact production costs, including energy and agricultural inputs, affecting farmers' income stability. Furthermore, stricter import tariffs and other trade barriers stemming from stricter agricultural product standards directly affect farmers' production costs and their ability to repay bank debts.

However, amidst global geopolitical conflicts, food supply chains have become more valuable resources due to rising global agricultural commodity prices driven by increased demand for food security. The Thai agricultural sector, as a producer in the supply chain, has also benefited positively.

Therefore, in this regard, the Bank for Agriculture and Agricultural Cooperatives (BAAC) has an opportunity to expand loans for technology-based production transformation to leading SMEs and farmers, in order to increase productivity and export standards. This supply chain financing support is not just about helping farmers, but about investing in industries with guaranteed demand.

Set 6 strategies
It serves as a source of support for farmers.

Mr. Chatchai stated that to address the aforementioned challenges, the Bank for Agriculture and Agricultural Cooperatives (BAAC) has established key strategies for the 2026 fiscal year based on the principles of sustainable development through the balanced and comprehensive ESG2 framework (ESG squared), encompassing environmental, social, governance, and growth dimensions. These six strategies are as follows:

Strategy 1 (SO1) Manage assets to generate balanced income.

Given the vulnerability and high uncertainty in the agricultural sector, the Bank for Agriculture and Agricultural Cooperatives (BAAC) focuses on sustainable growth through improving the quality of its loan portfolio. This involves concentrating on loan growth in new, income-stable segments while managing expenses and financing appropriately. At the same time, it continues to support vulnerable customer groups through agricultural and related business loans, which remains a core mission and foundation of BAAC.

Strategy 2 (SO2) Manage loan quality for financial strength.

Household debt among farmers remains persistently high, signaling a trend of non-performing loans (NPLs). Therefore, the Bank for Agriculture and Agricultural Cooperatives (BAAC) needs to consider effective debt management, focusing on managing overdue debt to maintain liquidity and generate stable income streams. This includes monitoring and managing the portfolio of non-performing loans through appropriate tools and measures tailored to each customer's capabilities, as well as utilizing the internal Asset Management Company (AMC) mechanism to manage the debt quality of small-scale farmers. This will make the debt management process more systematic and efficient.

Strategy 3 (SO3) Empower customers and communities through agricultural core initiatives.

The growth of the agricultural sector is projected to slow down due to the increasing age of farmers. Therefore, BAAC (Bank for Agriculture and Agricultural Cooperatives) is focusing on revitalizing vulnerable farmer groups to enhance their capabilities, especially those nearing the end of government debt moratorium programs. This aims to enable them to resume debt repayment and conduct business with the bank normally. In addition, BAAC is focused on sparking agricultural growth by supporting the creation of added value for customers' high-quality, standardized agricultural products. These products are then brought to market through online platforms that cater to modern consumers, and BAAC is promoting an attractive image for farmers' products sold through the bank's branches (BAAC Branch Outlet).

Strategy 4 (SO4) Enhance organizational capabilities through digital technology and innovation.

Amidst increasingly fierce competition in the financial and banking sector and rapidly changing customer financial service behavior, the digital financial landscape continues to show signs of sustained growth.

Therefore, the new era for BAAC (Bank for Agriculture and Agricultural Cooperatives) must focus on upgrading processes and services with digital technology to comprehensively meet the needs of modern consumers, compete equally in the market, and adapt to BAAC's context. This will enable the bank to generate a higher proportion of revenue from digital channels, coupled with the development of innovations that create significant added business value, thus supporting its transformation into a modern agricultural bank.

Strategy 5 (SO5) Enhance the capabilities of personnel and GRC Supporting business growth.

As technology changes rapidly, BAAC (Bank for Agriculture and Agricultural Cooperatives) must continuously adapt to keep pace with the competition. BAAC's personnel are a vital resource and a key factor in achieving its mission, and efficient personnel reflect the characteristics of a high-performance organization.

Therefore, BAAC (Bank for Agriculture and Agricultural Cooperatives) must accelerate the development of future-ready skills among its workforce to create a sustainable competitive advantage for the organization. This must be achieved through integrated governance, risk management, and regulatory compliance processes.

Strategy 6 (SO6) Managing the organization and community to achieve… Net Zero Emissions

Sustainable development remains a key global issue. The Bank for Agriculture and Agricultural Cooperatives (BAAC) is committed to contributing to this goal at both national and international levels. Therefore, it has established organizational management goals focused on sustainability in economic, social, and environmental aspects under the ESG framework, by reducing greenhouse gas emissions from its normal operations.

This goes hand-in-hand with supporting communities towards the goals of a low-carbon society and net-zero emissions, as well as offering financial products and services that support organizations seeking to transition to sustainability, enabling them to compete effectively in international markets with stringent environmental regulations.

“Overall, BAAC’s strategy for fiscal year 2569 is to build a strong foundation from stable income, under the strengthening of its internal capabilities through digital technology, innovation, and a robust human resource to support the future. This ensures sufficient resources to sustainably care for vulnerable groups in society and among farmers, in line with the core mission of a specialized financial institution, ensuring farmers have a strong support system amidst these changes.”

do Digital Transformation
Coping with the challenges. Virtual Bank

Mr. Chatchai stated that the introduction of virtual banks presents challenges because, being branchless, they have lower costs and can offer products with higher deposit interest rates or lower loan interest rates. However, BAAC (Bank for Agriculture and Agricultural Cooperatives) can still compete by increasing efficiency and managing operations within appropriate cost structures.

The Bank for Agriculture and Agricultural Cooperatives (BAAC) is addressing this challenge through Digital Transformation under its strategies: enhancing organizational capabilities with digital technology and innovation (SO4) and empowering human resources to support business growth (SO5). This approach focuses not only on creating applications to better meet customer needs but also on investing in technological infrastructure to reduce operating costs and lower the cost per transaction. This includes implementing AI and automation in the loan process (AI Automation) and upgrading internal processes with technology (Reprocessing).

This is aimed at streamlining workflows and reducing employee working hours, which will help drive the bank's cost-to-income ratio down to an appropriate and sufficient level to remain competitive in the market. It also focuses on encouraging customers to conduct transactions more through BAAC Mobile, reducing the burden of branch transactions and allowing the bank to manage its personnel more effectively, focusing on tasks that create added value for both customers and the bank.

Furthermore, amidst the rapid and precise competition in the modern financial sector, from the perspective of BAAC (Bank for Agriculture and Agricultural Cooperatives), AI Transformation may be a new breath of fresh air for the agricultural sector and a direction for BAAC in 2569. BAAC doesn't view AI as merely a supplementary tool, but rather as a long-term plan (AI Roadmap) that meticulously lays the foundation to build trust and transparency, maximizing benefits for farmers and supporting the full transition to a modern agricultural bank, in line with the bank's goals.

The Bank for Agriculture and Agricultural Cooperatives (BAAC) therefore began by laying a strong foundation during 2567-2568, focusing on key areas such as AI Governance & Ethics. This included establishing policies aligned with international standards to ensure transparent, explainable, and data privacy-respecting AI decision-making, all under a clear and transparent governance structure established by a Data Governance Committee.

This includes screening AI projects, investing in information technology infrastructure, and providing employees with a secure environment to experiment with generative AI. Laying these foundations is not just about preparing systems, but about building trust, which is crucial for the use of AI in the financial sector.

Once the foundation is in place, BAAC (Bank for Agriculture and Agricultural Cooperatives) will move forward with building an ecosystem and innovation strategy during 2569-2571, focusing on using AI to increase opportunities and reduce economic inequality for farmers in collaboration with external partners.

Examples of AI development plans include using credit scoring for farmer customers who are deferring debt payments to accurately assess risk, helping farmers access funding more easily; using AI for document processing in both loan and deposit matters to reduce processing time and document verification; and using AI for automated loan and insurance renewal approvals to increase speed.

Beyond technology, BAAC (Bank for Agriculture and Agricultural Cooperatives) also prioritizes its personnel, building AI literacy through e-learning initiatives across the entire organization, from operational levels to senior management. Furthermore, there are plans to include AI competencies in employee profiles to identify and cultivate AI champions in each field who will lead innovation.

“BAAC’s AI adoption is not just an IT project, but a transformation of our organizational culture to ensure farmers receive the maximum benefit. BAAC’s goal is not just to be the best bank in terms of technology, but to be the strongest foundation for Thai farmers in the age of artificial intelligence.”

Follow and read other columns in the February 2569 Bank Finance Journal, Issue 526, in digital format: https://goo.gl/U6OnIi

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