Bright future for digital loans
Slow economy leads to surge in requests
Economic doldrums related to the pandemic have prompted a surge in demand for digital loans in several forms, including nano-finance products offered both by banks and non-bank companies.
Line BK, a social banking collaboration in Thailand between Kasikornbank (KBank) and Line Corporation, reported that personal digital loans increased to 6 billion baht in the first five months after launching in October 2020.
The company is targeting new loans worth 10 billion baht in the 12 months following product launch.
"With lower income and a liquidity crunch because of the sluggish economy, there has been higher demand for loans, especially from the low-income segment," said Tana Pothikamjorn, chief executive of Kasikorn Line.
"For the past five months, there have been around 2 million loan applicants, from which around 200,000 were approved."
The low-income segment covers the underbanked, unbanked, and self-employed borrowers, who have no salary pay slips and earn income below 15,000 baht per month. This is the company's key market segment.
On average, the credit line per borrower ranges from 20,000 to 30,000 baht.
Despite higher loan demand, the company is focusing on risk management, said Mr Tana.
The company believes it can control non-performing loans (NPLs) at less than 5%.
Regarding the high growth potential of digital loan products, he said there is tough competition in the segment.
Comprehensive digital platforms and loan analysis through alternative data is the key to facilitate the company's expansion, said Mr Tana.
Siam Commercial Bank (SCB) chief digital banking officer Chalee Asavathiratham said the bank booked 20% year-on-year growth for digital loans, which covers personal loans, credit cards, and small enterprise loans, in the first quarter of the year.
Loan applicants also increased dramatically by 300% over the same period.
SCB, the country's fourth largest lender by total assets, offers digital loans via its mobile banking app, SCB Easy, with an average credit line of 50,000 baht.
The bank aims to expand digital loans, targeting new bookings of 88 billion baht in 2021. Despite positive digital loan growth, the bank projects to control NPLs at above 1%, said Mr Chalee.
"Despite strong competition in this innovative loan market, there is great opportunity depending on the business strategy of each service provider," he said.
Krungsri-Grab's digital loans, a nano-finance product offered by Bank of Ayudhya (BAY) and Grab Thailand to Grab drivers and merchant partners, also expanded digital loans outstanding to around 500 million baht as of the first quarter this year.
BAY and Grab jointly launched a digital loan product in the fourth quarter last year.