Government Savings Bank (GSB) is transforming its business model for sustainable development by combining social concerns and business activities, aiming to achieve a net profit of 33 billion baht, says president Vitai Ratanakorn.
At a briefing for a GSB Forum 2023 entitled "ESG Social Pillar Driven", he said the bank's business strategy is to create opportunities from existing social problems.
For example, last year the bank ventured into the auto title loan business to help low-income earners in rural areas meet their liquidity needs. They used their motorcycles as collateral for quick cash, with the bank offering low-rate loans with interest of 10%.
Regulators reduced the maximum interest rate for this segment from 28% to 10%, but the bank could still make a profit from this type of loan, said Mr Vitai.
This year, the bank has helped around 2 million people access loans on a "fair borrowing" cost basis, he said.
Apart from auto title loans, GSB also provides land loans, which use mortgage-free land as collateral.
Mr Vitai said the integration between social value and business value supports business operations by creating shared value (CSV), resulting in sustainable growth and business profits.
While budgets for corporate social responsibility become a cost for businesses, CSV can create corporate advantages, he said.
This year GSB expects profit to tally 33 billion baht, up from 27 billion in 2022, attributed to business expansion and reduced operating costs, while maintaining interest rates unchanged.
The bank reduced its operating costs by around 10 billion baht per year, while the bank's non-performing loans remained at 3% of outstanding loans.
Senior executives of the Government Savings Bank at the opening ceremony of GSB Forum 2023 held on Tuesday.
Mr Vitai said if GSB wants to set interest rates to reflect bank risks, as the majority of its customers are retail, it would have to increase rates by 0.50% to 0.75% on average. Yet the bank has not raised rates in response to such risk, he said.
GSB wants to play a part in solving social problems, particularly reducing poverty and social disparities by increasing access to credit for underserved customers, said Mr Vitai.
Some 3.2 million GSB customers have gained access to credit through bank efforts, he said.
Mr Vitai said in the beginning of next year, GSB plans to operate a non-bank business. It is applying for a licence from the Bank of Thailand, he said.
As this segment can take on more risk than normal banking businesses, non-bank lending could attract more people with low credit or no credit who cannot borrow from financial institutions, said Mr Vitai.
These people can apply for a loan from a non-bank and avoid the predatory interest rates of loan sharks, he said.