KTB to expand successful microfinance service
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Krungthai Bank is moving to expand its successful microfinance service by raising the credit limit and offering lines to subtenants in fresh markets.
The microfinance product was launched to serve the owners and vendors of more than 300 wet markets nationwide. Borrowers do not have to show any bank statements.
KTB has lent Bt300 million to the microfinance segment in the first four months of this year.
Thanks to the risk-management system and the relationship with market owners, who help screen borrowers, the microfinance scheme is successful, Weidt Nuchjalearn, a senior executive vice president, said last week.
Non-performing loans (NPLs) are only 0.9 per cent of the total to the segment.
To prevent NPLs, borrowers are required to open a savings account with the bank so that instalments can be deducted every seven days. In case the bank cannot deduct instalments from accounts, outside collectors will follow up on the debt instead of bankers, he said.
KTB is waiting for approval from the central bank to allow it to outsource bad-debt collection. The approval is expected this month.
“We might not use collectors much because the customer base has discipline and loyalty to repay debts because they have never had access to sources of funds from financial institutions.
The interest rate from microfinance is also lower than from loan sharks,” he said.
KTB gives a maximum credit line of Bt200,000 to market owners and vendors who are lessees in the markets. The loan is for two years with interest at 1.25 per cent per month against the 10 per cent per month charged by loan sharks.
“We have extended the loan to a maximum of four years to help ease the liquidity of borrowers. The longer term is expected to attract more customers,” he said.
The bank aims to expand the borrowers to sub-lessees and increase the credit line to Bt300,000.
Some vendors want capital for the installation of new equipment. Some want money for a down payment on a commercial vehicle. The credit line extension could help support those businesses.
Even though microfinance loans are not big, the portfolio gives the highest yield of more than 10 per cent. It also opens up opportunities to cross sell products, he added.
The bank targets Bt1.5 billion in new microfinance loans this year.
