TCRB sees drop in bad loans
Training schemes improve asset quality
Even though low-income earners are considered higher risk and they are reeling from the country's weaker economy, Thai Credit Retail Bank (TCRB), whose main customers are low-income earners, saw a dip in its bad loan ratio thanks to better financial discipline.
The bank's non-performing loan (NPL) ratio declined to 5.4% at the end of June from 5.7% at the end of last year, said managing director Roy Agustinus Gunara.
"Lower-income customers typically carry higher risk, but we manage to control bad loans in that customer segment. Apart from a strong risk management basis, financial literacy and financial training programmes offered to that segment helped improve the bank's asset quality," he said in an executive interview with Bangkok Post.
"Because the underserved segment is our target, we need to educate them to cultivate financial discipline. Such practice is a win-win situation for both the bank and customers."
Vendors in fresh markets, mom-and-pop stores and self-employed entrepreneurs are the bank's key market segments. Around 150,000 clients, representing 80% of TCRB's client numbers, are nanofinance customers.
Ironically, commercial banks targeting mid- to high-income earners and corporate firms -- regarded as higher quality groups -- are scrambling with higher NPLs.
Lower loan growth
Mr Gunara said TCRB had loans outstanding amounting to 51 billion baht at the end of June, marginally below its target by 1%.
Sluggish loan demand from mid-sized and large enterprises, consistent with the country's economic circumstances, was attributed to the lower loan growth in the first half, he said.
However, the bank's two main customer groups, micro small and medium-sized enterprises (micro-SMEs) and nanofinance, showed double-digit loan growth over the same period.
The bank defines mid-sized and large SMEs as those with a credit line of above 20 million baht, while micro-SMEs have credit below 20 million.
Those with a maximum credit line of 100,000 baht are nanofinance customers.
The bank's nanofinance borrowers mostly work in 11,000 fresh markets across the country.
On average, there are around 2-3 fresh markets to a community and TCRB has one branch to serve them.
Despite missing its lending target in the first half, the bank believes its full-year goal is achievable because of loan demand from its key customer segments.
TCRB also expects its profitability will improve this year.
It recorded net profit of 243 million baht for the first half this year, and 771 million in 2018.
Mr Gunara said the bank's branch network now stands at 460 nationwide, up from 322 at the end of last year.
TCRB is likely to achieve its 500-branch target this quarter, earlier than budgeted at the end of this year.
"We manage to acquire 6,000 new customers a month and most of them are new clients. Around 50-60% of the new clients have no record in the National Credit Bureau," he said.
"Some of them are assumed to have borrowed from loan sharks."
Enticing underground loan customers to use financial institutions' lending is one way to ease the country's swelling household debt as the cheaper interest rate helps borrowers with their financial burden and may improve their debt repayment ability.
Nanofinance is one of the Finance Ministry's strategies for widening formal financing sources for low-income earners and informal workers to help them avoid underground lending, in addition to encouraging loan sharks to enter the formal lending system.
Nanofinance operators are permitted to lend only for occupational purposes, with a lending limit of 100,000 baht per borrower and a ceiling interest rate of 36% a year.
The bank charges micro-SMEs around 9-10% per year.
Mr Gunara said the bank expects to roll out its e-wallet service in the final quarter after being granted a business licence from the Bank of Thailand a few weeks ago.
The bank is awaiting official approval from the regulator before connecting its e-wallet with the national e-payment platform, PromptPay.
Digital technology will be another key instrument to help improve the financial discipline and asset quality of low-income borrowers as they can see financial data on the digital channel, while the bank can better control default risks of customers by using data analytics, he said.
"Right now, I think e-wallet is more suitable for our customers than mobile banking. Most of our customers don't have enough savings to access the deposit service, while a deposit account is required for those who use mobile banking services," said Mr Gunara.
Given TCRB's programmes on financial and savings discipline offered to its customers, a mobile banking app could be a future channel, he said.