CFG Services, best known for its Srisawad Ngern Tid Lor (Money on Wheels) auto loan brand, is offering more opportunities for wet-market traders to access funding.
The Bank of Ayudhya subsidiary entered the microfinance sector about one year ago, slowly expanding its loan portfolio due mainly to strong scrutiny of the high-risk segment.
Tanyapong Thamavaranukupt, CFG's managing director, said the major risks in microfinance usually come from internal fraud and customers' behaviour.
As a result, it has invested in human resources, infrastructure and risk management to develop microfinance significantly.
Mr Tanyapong said development will be gradual and prudent in view of the hard lessons learned by several financial institutions that have failed in the microfinance business over the past 10 years.
Traders in wet markets usually run their businesses on a cash basis without pay slips or invoices.
Unsurprisingly, this group is regarded as a high-risk sector that rarely accesses financial institutions. They rely largely on non-system credits when they need funds.
"We entered wet-market financing with two key objectives," said Mr Tanyapong.
"First, we can open more opportunities to market traders who largely cannot access banks' loans because they lack qualifications under financial institutions' requirements. Second, it's a business decision."
He said in a high-risk sector CFG needs to ensure customers can survive on their own and grow sustainably. As a result, good risk management is an important factor.
Mr Tanyapong said his company's staff will associate with traders who have potential to be clients, studying their behaviour and income before approving loans.
Interest will be charged at a maximum of 28% per year as per central bank regulations.
Minimum and maximum credit lines per customer are set at 10,000 to 100,000 baht, with the longest loan period 36 months.
CFG also offers daily and weekly finance in a similar way to the non-system credit that traders normally use.
"In fact, we copy the underground loan model but take it into the financial system with fairness, reasonableness and good risk management," Mr Tanyapong said.
"A lot of customers in the segment earn about 100,000 baht per month but cannot access bank loans, as they have no pay slips or bank statements."
A company survey found half the traders in a wet market need loans, while 95% have debts with loan sharks.
Once CFG offers microfinance, many traders move to the mainstream system.
The company has 2,000 customers from 40 markets in Bangkok with outstanding loans of 50 million baht.
Last year, it booked overall loan growth of 50% to take its loan portfolio to 6.5 billion baht comprised mainly of truck refinancing.
Refinancing loans for cars and pickup trucks represents 55% of its loan portfolio, followed by 30% for trucks and tractors and 15% for motorcycles.
The company targets loan growth this year of 43% that will take its loan portfolio to 9.3 billion baht.