AIRA Capital building consumer finance portfolio

After listing on the Market for Alternative Investment (MAI) last year, AIRA Capital has been approached by both local and foreign companies for possible strategic partnerships.
AIRA has adopted the European management style of allowing its subsidiaries to set up independent boards of directors.
“AIRA Capital currently holds stakes in five companies in the financial sector and after listing on the MAI, energy and construction companies have offered joint investments with us,” she said. “We were surprised that after listing, we have received offers from many companies in both the financial and non-financial sectors.”
Aiful Corporation, one of the largest Japanese consumer-finance companies, was the first to form a strategic partnership with AIRA Capital after the MAI listing. The two firms last month set up AIRA & Aiful Corporation (A&A) with registered capital of Bt1 billion to conduct consumer finance business in Thailand. AIRA holds a 51-per-cent stake in the joint-venture company.
Nalinee said consumer finance was a priority for A&A.
The company targets 1 million clients for consumer finance within a couple of years, focusing on provincial people who work in Bangkok and consumers in the Central region with monthly income over Bt10,000.
She said the loan portfolio for consumer finance was hard to predict because these are revolving loans.
“We are in the growth stage, but the consumer finance loan portfolio should be up to Bt50 billion within a year or two after we start operating,” she said.
As a holding company, AIRA will focus on diversifying risk, with most investment in the financial sector. The company expects its growth to mature within five or six years, so between now and 2017 it plans to acquire at least seven companies to strengthen its assets size.
Reaching maturity will mean the company is stable enough to withstand unexpected situations, she said, noting that Thai conglomerates Siam Cement Group and PTT were examples of stable organisations able to resist crises.
This year, the company expects to acquire two companies.
Now that the government has announced a clear policy on initiating nano-finance in Thailand, AIRA and Aiful are preparing to get into this business as well.
“Nano-finance is not [very] different from consumer finance but we have to be more cautious with risk management. We will not incur higher costs from nano-finance because we can apply the same system as for consumer finance. But the main cost of nano-finance is portfolio risk management,” she said.
The chance of defaults by nano-finance customers is higher than for consumer finance. However, debt collection should be flexible, because in the view of AIRA and its Japanese partner, nano-finance is not loan-sharking but lending to consumers who have few other options for accessing funds.
The company is considering whether to set up a new subsidiary of A&A to oversee nano-finance or just a department.
A&A will import Aiful’s credit-scoring system from Japan. Aiful will send staff to help A&A categorise potential customers before granting loans. When the company gets that information, it will come up with a new loan target, Nalinee said.
A&A will apply for a nano-finance licence next week, and the credit-scoring process for both nano-finance and consumer finance should be completed within six months.