The wholly owned subsidiary, which will be capitalised at Bt50 million, will provide loans of up to Bt10,000 to individuals at low interest rates, Information and Communications Technology Minister Chuti Krairiksh said.
The funds will come from Thailand Post's internal cash flow and loans from the Government Savings Bank.
Finance Minister Korn Chatikavanij said the first loan was expected to be made in February. The interest rate has not yet been decided but it would not exceed 28 per cent.
The government expects between 14 million and 18 million people who currently borrow from loan sharks to turn to this new institution, he said.
On October 5, the Cabinet approved in principle the ICT Ministry's proposal to allow Thailand Post to provide the microfinance service to low-income earners and to solve the loan-shark problem.
Last year, of 38 million people of working age, from 20-59, an estimated 18 million lacked access to formal loans.
Recently Thailand Post said people would be recruited with expertise in microfinance and related regulations to run the unit. Thailand Post sees a good opportunity in the microfinance business, provided the new activity is managed well and associated risks are contained.
The Finance and ICT ministries believe Thailand Post can draw on its 1,200 post offices nationwide and 22,000 employees to provide financial services to the grass roots.
Thailand Post will pilot the service at 10 branches across the country. The subsidiary will seek partners to enhance its operation and will offer the complete financial service within two years.
Thailand Post's main business is postal services, which contributed 80 per cent of total revenue of Bt15 billion last year, followed by logistics and over-the-counter bill payments. It posted Bt916 million in net profit last year.
The Cabinet also approved the Government Savings Bank's Bt2-billion loans to freelance workers as well as the Budget Bureau's proposal to channel foreign-exchange gains of Bt5.8 billion to disaster relief.