Bangkok Post editorial cartoon describing the plight of poor people who borrow money from loan sharks at very high interest rates & have great difficulty paying back the loan. Inset: Woman who set herself on fire at the government center in 2014 after falling in debt to loan sharks which directed public attention to the problem, shot from famous TV commercial a decade ago that show the violence & force employed by loan sharks to collect debts.
Pursuing the 'nanofinance' idea of small loans to poor people to fight loan sharks, Bank of Ayudhya launches new loan business.
BANKING & THE POOR
Nanofinance to fight loan sharks
The Bank of Ayudhya (BAY) has branched into nanofinance, aiming for loans outstanding of 170 million baht by the end of 2017.
'Nano' means a 'very small amount' and 'finance' means 'providing money for something'.
So, the basic idea is very small loans, such as the typical emergency loan that families sometimes need to deal with school or medical expenses.
NANOFINANCE TO FIGHT LOAN SHARKS
Nanofinance is a type of microfinance. Microfinance provides loans to low-income individuals and other people who have difficulty borrowing money from banks (see here).
Nanofinance aims to provide loans to the people who have the most difficult time qualifying for loans from banks, competing with (and hopefully displacing) the loan sharks who loan money to poor people at very high interest rates when banks reject them and sometimes use violence to get the money back.
The Abhisit Vejajjiva government (2008-2011) pursued aggressive anti-loan shark policies and the current nanofinance idea started to gain momentum after the coup in 2014 (see here).
Some 29 companies have obtained nanofinance licences already in Thailand, extending total loans of 622 million baht to 26,000 borrowers.
Loan shark TV commercial a decade ago that helped bring the issue to public attention.
BANK OF AYUDHYA'S NEW BUSINESS
Krungsri Consumer, the unsecured lending arm (unsecured loans) of Bank of Ayudhya, introduced Tao Kae Tan Jai, a revolving nanofinance loan product, last month.
Borrowers are charged 36% interest. A maximum loan of 100,000 baht will be offered to each borrower who qualifies. The company also requires a minimum monthly repayment of 5% of the loan principal.
Borrowers who have good repayment track records for more than six instalments will receive 10% cash back on interest.
In addition, for at least one year they will receive an additional credit line of up to 100% and cash cards that can be used for cash advance withdrawals at all ATM terminals.
It has loaned 2.8 million baht to 62 clients since the roll-out of the new product. Krungsri aims for nanofinance borrowers to reach 5,500 accounts by the end of this year.
CAPPING NON-PERFORMING LOANS AT 6-8%
"Given that nanofinance business carries high risk, we will focus on asset quality and cap the non-performing loan [NPLs] ratio at 6-8%, or two times the company's bad personal loans," said Ms. Nayanee Peaugkham, the managing director of Ayudhya Capital Services.
NPLs and operating costs are the key factors for this business segment.
If the company can control both factors at satisfactory levels, the business is projected to survive, she said.
Demand for nanofinance loans is strong and the company's approval rate for the product is 60% of applications.
Initially, Krungsri's nanofinance credit is available only in high-potential locations including Bangkok, the capital's suburbs, and Chon Buri province.
FUTURE BUSINESS EXPANSION IF NPLS CAN BE CONTROLLED
If the company manages to control both NPLs and operating cost as targeted, it will expand coverage to other big provinces next year, said Ms Nayanee.
Krungsri adopted its nanofinance business model from Indonesia-based Bank BRI.
Tao Kae Tan Jai is focused on small business operators with a clear residence who have run the business for at least one year.
Food and beverage, clothing and accessories, beauty salons, and general service businesses are the finance product's target clients.
Learn from listening
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additional : more; more than was first mentioned or is usual - ที่เพิ่มขึ้น
adopt : to accept or to start using something new - นำมาใช้
advance (noun): money paid for something not received or done yet - จ่ายล่วงหน้า, ให้ล่วงหน้า
aim : to have as your purpose or goal - มีเป้าหมาย มีจุดมุ่งหมาย
approval : official permission - การอนุมัต
asset : something owned by a person, company etc., particularly money and property - ทรัพย์สิน
beverage : a drink of any type - เครื่องดื่ม
borrower : a person who takes money from a person or bank and agrees to pay it back to them at a later time - ผู้ขอยืม
branched into : started doing some new activity or business -
cap : an upper limit on an amount of money that can be spent or borrowed - ขีดสูงสุด, ครอบ
cash : money - เงินสด
clear (adjective): easy to see and understand - ชัดเจน
compete : to try to be more successful or better than somebody else who is trying to do the same as you - แข่งขัน
coverage : the size of the area that is included or covered -
credit line (noun): money that can be borrowed if needed; already approved - เพดานสินเชื่อ; วงเงินสินเชื่อ
deal with : to take action to solve a problem - จัดการปัญหา
displace : to move something from its usual position - ทำให้เคลื่อนออก
emergency : an unexpected situation involving danger in which immediate action is necessary - เหตุฉุกเฉิน
expand : to make or become larger (noun form: expansion) - ทำให้กว้าง, ทำให้ขยาย
finance : to provide money for something - จัดหาเงินทุนให้
individual (adj): involving single people, in this case competitors, rather than as part of a group - ตัวบุคคล, ส่วนบุคคล
instalment (noun): one of many payments made every month/year to pay for something or pay back a loan - งวด, งวดเงินผ่อน, เงินผ่อน
introduce (verb): to present a new person or thing to another person who does not know them yet - แนะนำตัว, แนะนำให้รู้จักกัน
loan : an amount of money that a person, business, or country borrows, especially from a bank - เงินกู้
loan shark : a person who charges very high interest rates for money borrowed - ผู้ปล่อยเงินกู้โดยคิดดอกเบี้ยสูงมาก
low-income : earning little money - รายได้ต่ำ
maximum : the most possible - ที่สูงสุด ที่มากที่สุด
medical : connected with illness and injury and their treatment - ทางการแพทย์, ด้านการแพทย์, เกี่ยวกับการแพทย์
microfinance : the activity of providing loans to poor people and their small businesses that cannot get loans from banks - การเงินรายย่อย
minimum : as small in amount or degree as necessary or possible - จำนวนน้อยที่สุด, ปริมาณต่ำที่สุด
nano : very small -
non-performing loan (NPL) (noun): a loan that is not being paid back as arranged and may never be paid back; a non-performing loan (NPL), bad debt - หนี้เสีย, หนี้สูญ, หนี้ที่ลูกหนี้ไม่ยอมชำระตามกำหนด
operating cost (noun): the costs involved in the activities of a business such as equipment, supplies, training, etc -
operator (noun): a person or company that runs a business - ผู้ดำเนินกิจการทางธุรกิจ, ผู้ประกอบธุรกิจ
potential : what is possible - ความเป็นไปได้
principal : the original amount of money that someone borrows, which is paid back with additional money called interest - ต้นทุน
province : one of many divisions of the government of a country into smaller parts - จังหวัด
qualify (verb): to have what is needed to receive something or do something - เหมาะสม, มีคุณสมบัติเหมาะสม
repayment (noun): the act of paying back money that you have borrowed from a bank, etc - การชำระคืน, การจ่ายเงินคืน
residence : a place where someone lives - ที่พำนัก ที่อาศัย
revolving balance : the amount of money that people do not pay off on their credit card from month to month -
revolving fund (noun): a fund whose income or repayments can be used to finance its continuing operations from year to year - เงินทุนหมุนเวียน
risk : the possibility that something dangerous or unpleasant might happen - ความเสี่ยง
segment : market segment; products produced for a group of customers that have many things in common such as income or family size or age or location - ส่วนตลาด
segment (noun): a part of something - ส่วน, ตอน
suburb : an area or town near a large city but away from its centre - ชานเมือง
target : something you want to achieve; a particular number or amount that you want to achieve - เป้าหมาย
track record : (your reputation what people think of you), based on the things that you have done - ภาพรวมของผลงานที่ผ่านมาซึ่งเป็นที่รับรู้
typical : happening in the usual way; showing what something is usually like - ตามแบบฉบับ, ตามปกติ
unsecured loan (noun): a loan without security, i.e., a loan that is not backed by something valuable, like property or other assets - เงินไม่วางประกัน
violence : physical force with the deliberate intention of causing damage to property or injury or death to people - ความรุนแรง, การใช้กำลังทำลาย
withdrawal : taking money out of the bank - การถอนเงิน