Line BK, a social banking platform in Thailand formed by a collaboration between Kasikornbank (KBank) and Line Corporation, plans to tighten new loan approvals in line with higher risks during the prolonged pandemic.
Demands for loans among low-income customers, the target market of Line BK, has been rising, especially during the pandemic as consumers need more liquidity for daily spending.
The company has strict loan approvals because of higher credit risk among borrowers, said Tana Pothikamjorn, chief executive of Kasikorn Line.
Line BK's target segment of underbanked and unbanked individuals is inherently high risk, leading the company to have a loan approval rate of only 20% of total applications.
Line BK has offered personal loans from Oct 2020 and expanded to nanofinance products from April this year.
"After starting digital loan services in October last year, around 4 million loan applications have been received, higher than the total Line BK userbase of 2.8 million users. This reflects that some customers re-applied for loans after their first applications were rejected."
Clients with monthly salaries represent 59% of total customers and the remaining 41% are self-employed clients, including entrepreneurs, most of whom are online merchants.
Clients whose monthly income is between 15,000-30,000 baht represent 32% of the total portfolio, followed by those with monthly incomes lower than 12,000 baht at 27%, above 30,000 baht per month at 24%, and between 12,000-15,000 baht per month at 17%.
In the first half of this year, the total loan outstanding was 9 billion baht, while the non-performing loan (NPL) ratio was around 2%.
The company aims to control the bad debt ratio at no more than 5% at the end of this year by paying attention mainly to the existing customers and helping customers hurt by the pandemic with debt restructuring.
Line BK also wants to tighten new loan approvals to control asset quality in the second half.
If the Bank of Thailand cuts the ceiling interest rate for personal loans and nanofinance, Line BK will adjust the criteria for loan products in line with higher risk, Mr Tana said.
This shift might increase the company's rejection rate, according to Mr Tana.
Currently, the central bank requires a ceiling rate for personal loans at 22% annually under its debt relief programme while the nanofinance ceiling rate is 33%.