KTB to expand microfinance after test run
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Funding access for paperless vendors
Krung Thai Bank has made successful inroads into the microfinance segment by allowing vendors who have no bank statements to acquire funding at lower interest than they would have to pay loan sharks, and will expand the scheme in 2012.
To avoid non-performing loans (NPLs), it outsources debt collection to people based in the areas where the service is offered.
KTB president Apisak Tantivorawong said the bank had placed importance on this segment because it wanted to help grass-roots vendors access financing easily without resorting to loan sharks. The interest rate for microfinance is less than 20 per cent, a much less painful bite than the sharks take.
The Finance Ministry recently instructed state-owned banks such as KTB to focus more on retail clients, as some have competed with commercial banks for big clients though that is not their main business objective.
KTB started offering microfinance loans this year on a trial basis in 20 areas and aims to expand its coverage nationwide in the new year.
Borrowers under the programme must be vendors who have no bank statements, and maximum loans are Bt200,000.
According to the microfinance model, bank officers work with owners of fresh markets to determine the number of vendors who require loans. The fresh market must be registered with the Public Health Ministry to ensure the quality of clients.
About 240 fresh markets are registered, comprising more than 40,000 vendors.
Apisak said the bank employed local people in each area to collect debts, so as to maintain a relationship with vendors. Such a relationship is essential to reduce risk of NPLs, and in fact KTB has experienced no bad loans during the trial period, he said.
The Bank of Thailand has encouraged all commercial banks to become active in microfinance. KTB’s microfinance model was agreed by the BOT, and Apisak believes many other banks will follow its model after seeing its achievements.
“We have not officially launched the microfinance scheme yet, as we have just started it in a few areas and want to ensure this model succeeds before spreading it to all provinces,” he said.
Microfinance gives a 20-per-cent-higher yield than small-enterprise loans.
Apisak said the microfinance portfolio would be no more than 1 per cent of KTB’s total retail banking portfolio because of the small size of each loan.
Weidt Nuchjalearn, KTB senior executive vice president, said microfinance would strengthen retail banking, and the bank aimed to increase the proportion of retail loans to 60 per cent within three years from 40 per cent currently.
