Abstract:
Cooperative movement in Thailand has a long history with the establishment of Wat Chan Cooperative way back in 1916. The objective then was to save Thai farmers from losing most of their agriculture land to the middle men and money lenders, resulting from inability to settle their debts. Today more than 7000 cooperatives exist in Thailand alongside other established institutions of intermediation such as the commercial banks, Islamic bank and credit companies forming an important component of the vast landscape of Thailand financial
infrastructure. Islamic cooperative on the other hand is a new entry to the financial system, emerged in 1987 starting with the establishment of Islamic Savings Cooperative of Pattani Limited by Den Tokmena, a former senior government officers and Vice Minister of Health Care and Home affairs of Thailand. The existence of Islamic cooperatives, in particular in the southern region is not without problems. Many contemporary and longstanding issues are haunting the Islamic cooperatives in particular on the unfavourable egulatory and supervisory frameworks that have not been supportive of their growth and development. Similar to the case of Islamic bank of Thailand (IBank), Islamic cooperatives in Thailand do not have a ―level playing field‖ with their conventional counterparts. The issues are worsened with higher risk exposures that Islamic cooperatives are facing due to the nature of their products and services that have to be Shariah compliant. Many Islamic cooperatives are facing problems of inadequate capital and tight liquidity position, together with incompetent staff and poor corporate governance. This study is an attempt to evaluate the natures and severity of investment risks of their products and services that have to be Shariah compliant in Islamic cooperatives in southern Thailand: Ibnu Auf Cooperative Ltd., and hence to propose workable strategic mitigation plans.
