SCB mulls moving into nano-finance if TCG agrees to partner
Play
SIAM Commercial Bank is conducting a feasibility study into nano-finance, which it is considering introducing as a new business segment for the bank.
However, SCB will be cautious about this riskier form of lending if it decides to go ahead, as it does not want to see additional bad debt, even though the margin from such loans is high.
SCB president Yol Phokasub said the bank had discussed with the Thai Credit Guarantee Corp (TCG) – a specialised financial institution under the Finance Ministry – the possibility of it partnering SCB if the bank decided to introduce nano-financing.
While financial institutions could face non-performing loans (NPLs) of at least 5-10 per cent from nano-financing, such figures are generally acceptable for lenders due to the interest rate of 36 per cent per annum that is generally charged to borrowers, he said.
Without a partner such as TCG, however, SCB might not enter the nano-finance market, because the current economic circumstances are unlikely to be supportive of such a foray by the bank, Yol added.
“If the bank doesn’t prepare properly, NPLs from nano-finance could be in triple digits, therefore it is essential to get the timing right in moving into nano-financing,” he explained.
SCB had earlier considered entering the hire-purchase market for motorcycle financing, where the relatively small loan size is similar to nano-finance, but it decided to shelve the plan as the timing was not right for such a venture, said the SCB chief.
The economic slowdown, which began last year, has caused the bank to tone down its lending to small-sized SMEs – a segment known as micro-finance.
Yol said that at SCB, the credit line for smaller SMEs was currently limited to Bt5 million per enterprise. The segment provides a loan portfolio of Bt50 billion-Bt60 billion.
“We are continuing to tone down this segment, as we need to wait and see whether loan customers will be able to make repayments against the backdrop of slower economic growth over the next 18 to 24 months,” he explained.
All businesses have their cycles, and SCB in the middle of last year lowered its hire-purchase lending for used cars, as well, he said.
However, the situation in regard to used cars has since improved, and the bank resumed providing credit to used-car borrowers in the first quarter of this year.
During the period of the previous government’s first-car buyer scheme, SCB’s auto-loan portfolio reached Bt200 billion, but it now stands at around Bt170 billion. It should, however, rise to Bt180 billion by year-end, said the bank president.
In its hire-purchase business, SCB has focused more on its auto-refinancing product called My Car My Cash, which it wants to become the market leader in the category.
My Car My Cash currently has a loan portfolio of Bt30 billion to Bt40 billion.
Small-business lending and hire purchase are part of its retail banking, which has an overall portfolio of Bt800 billion, of which Bt500 billion is accounted for by mortgages.
SCB is the largest mortgage lender among the country’s commercial banks. Retail banking accounts for 46-47 per cent of SCB’s total loan portfolio of Bt1.8 trillion, followed by wholesale banking at 36 per cent, and SME banking at 17-18 per cent.
