Facing pressure from soaring oil prices and an economic slowdown, more people

are swiping their credit-cards to make everyday purchases.

In March alone, spending on credit cards leapt 38 per cent to Bt63.2 billion over the same period last year, according to the Bank of Thailand.

Of the total, Bt35.6 billion - or 55 per cent - was spent on cards issued by Thai banks. This marks a 55-per-cent rise from March 2005. Non-bank cards accounted for Bt20.3 billion of the spending, up 24 per cent from March last year.

The increased spending lifted total outstanding credit-card debts to Bt143.6 billion as of March 31, up 21 per cent from the same time last year. Non-banks' aggregate outstanding balances grew 31 per cent to Bt67.1 billion. Thai banks however remain the biggest creditors, with total outstanding balances worth Bt48.6 billion.

Consumer-loan makers attributed the sharp rise to borrowers struggling to make ends meet. The rising cost of living has forced a number of customers to go into debt to cover routine expenditures.

Card issuers have also launched marketing campaigns to lure new customers. There were 10.2 million accounts as of March 31, 14 per cent from the same time last year. Thai banks saw their aggregate number of cardholders rise 19.7 per cent, but non-banks still had the most accounts at 5.14 million.

Easy Buy Plc, a Japan-based retail finance provider, extended more consumer loans in the first four months of the year than it has since its started operating in Thailand, according to Katsuhiko Madono, the company's chief executive said. The higher cost of living has increased demand for consumer loans, he said.

In the first four months of the year, the company's extended Bt3 billion in new personal loans, a 20-per-cent increase from the same period in 2005.

"This is the company's best performance since launching personal-loan products in Thailand in 2001. Our historic high loan growth was the result of two core reasons. The first is loan requirements to cover clients' financial plans, while the other is economic pressure. Once the cost of living is higher, many customers need loans for routine spending," Madono said.

The company is closely monitoring its loan collections as the economic conditions worsen. More borrowers are having trouble repaying loans than before, while the circumstances have decreased the company's approval rate of loan applications to 60 per cent.

With higher interest rates and fuel prices driving up the costs of living, around 1,000 of the company's borrowers have asked the company to reschedule their payments. They want to extend the loan period, as well as adjust other loan conditions, he said. Easy Buy that its new loans will grow by Bt14 billion, 40 per cent more than last year.

Apichat Nantaterm, executive director of Aeon Thana Sinsap (Thailand), another consumer loan maker, said that demand is high.

"In an uncertain economic environment, consumers want to save their cash first and borrow for necessary spending. The company's loans mainly focus on product financing, in particular, for buying electrical and household goods," he said.

However, Kwanchai Modpradit, director of marketing for Capital OK Ltd, said the company's lending for the first four months of the year was lower than targeted. "But the borrowers are high quality ones who are seeking loans for necessary spending amidst the economic slowdown," he said.

He predicted that the economy would improve in the third or fourth quarter of the year after the next general election.

Card issuers have asked the central bank to raise the maximum annual interest rate past the current 18 per cent, citing higher costs of funding. The BOThas yet to approve the proposal.

Tarisa Watanagese, the central bank's deputy governor, said the BOT did not know exactly how much the creditors' costs have increased, so it could not make a decision. The BOT has to wait for details of higher costs, but only one issuer has sent information to date.

"The BOT has been cautious with the credit-card business and has found that there is no significant default rates. Non-performing loans remain low," she said.

According to the BOT, debtors have been taking cash advances on their credit cards. As of March, cash advances spiked 44 per cent from the same time last year, to Bt15.8 billion. Cash advances on Thai banks' cards increased by 49 per cent to Bt11.2 billion. Withdrawals via foreign full branches and non-banks increased by 36 per cent and 34 per cent respectively.

Card spending abroad jumped 11 per cent to Bt2.1 billion in March, on which spending on via Thai banks saw a 17 per cent rise, followed by 13 per cent on cards issued by foreign banks with branches in the Kingdom.

Anoma Srisukkasem

Somruedi Banchongduang

The Nation