CFG's microfinance programme frees many low-income people from grasp of loan sharks

Wandee Sanesakul, operator of a kiosk selling fried oyster and pad thai at Siriraj Market (Talad Wang Lang), started her business with high hopes. She borrowed Bt50,000 from loan sharks to start the business. But she ended up being burdened with a debt of more than Bt1.7 million from the high interest rates.

Then CFG Services, known for its Srisawad Ngern Tid Lor (Money on Wheels) brand, offered to help Wandee through its Wet Market Trader microfinance programme.

Before granting a Bt900,000 loan to Wandee, Piyasak Ukritnukun, senior vice president of CFG, and his staff helped calculate her daily income and her costs, so the company would know whether she had the capability of repaying the debt while still having enough cash flow to run the business.

Wandee has a daily income of Bt30,000-Bt40,000, but saddled with interest rates of 10-30 per cent a month, she had to pay combined principal and interest of Bt31,200 a day to several loan sharks.

She said she had been unaware of Srisawad before, but when a customer-relations officer offered to help with an amortisation loan with an interest rate of 1.3 per cent per month, she accepted, and started a new life with the organised financial market.



Wandee has been making daily payments of Bt1,500 to CFG, and now her outstanding debt to the service is down to Bt300,000. She said she would not borrow from loan sharks any more now that she has been able to manage her operation through microfinance.

She said she dreamed of owning a commercial building in which to run a restaurant offering fried oyster and PAD thai.

Piyasak said Siriraj was the pilot market for the CFG programme of providing secured and unsecured loans to vendors or low-income people.

Before setting up the programme in the wet market, CFG reviewed the framework of its microfinance model in order to help improve borrowers' quality of life and sustain their profitability. Capability, collateral, condition, capital and character are the five criteria of the framework.

CFG will not deal with vendors operating near gambling dens or close to hypermarkets. It is concerned that such customers might spend the money they have borrowed on gambling or, if they are near a hypermarket, might not be able to compete.

Piyasak said the relationship between CFG staff and borrowers was important, so its customer-relations and credit officers must make themselves available in the wet markets.

Before it establishes its programme in a wet market, CFG does research. For two weeks, its officers get to know all the vendors in the market and collect information to see who should be helped and who should not.

The key to the success of microfinance is debt collection. CFG staff understand that market vendors have no time to go to banks to make their debt payments because they have to stay at their kiosks, waiting for customers to pass by. Therefore CFG has on-site collection staff, equipped with tablet devices to keep track of the daily instalments of each borrower and mini-printers to issue receipts. In this way, the borrowers have a printed record with which to keep track of their daily payments and outstanding debt.

To prevent embezzlement by staff, CFG limits the amount of debt each officer can collect per day. This limit is entered on the officer's tablet, as well as the amount of debt payments deposited at the bank every evening.

The company has provided microfinance loans for two years and the rate of non-performing loans is only 0.05 per cent thanks to the on-site collection system.

At Siriraj Market, about 250 vendors are customers of the Wet Market Trader project, with total outstanding loans of Bt7 million.

CFG currently provides loans under the Wet Market Trader programme of Bt130 million in 42 markets, 32 of which are in Bangkok and 10 upcountry. About 2,300 borrowers are classified as active, meaning they have good discipline and have a high chance of being approved to for a repeat or top-up loan for expanding their businesses.