One year on, CFG Services slows down lending to fresh-market vendors
CFG Services has shifted into low gear in providing micro-credit to fresh-market vendors after finding that after one year in the business it is still not familiar with the product."Some banks have stopped microfinance trade loans because this kind of lending does not easily lead to sustainable growth, so we have to go step by step rather than proceed aggressively," managing director Tanyapong Thamavaranukupt said yesterday.
The company provides microfinancing under the Srisawad Ngern Tid Lor (Money on Wheels) brand as part of Krungsri Group's social mission to help people outside the mainstream system gain access to credit.
After being in the fresh-market business for a year, the company found that it was too early to push the business aggressively.
So far it has extended Bt50 million to 2,000 vendors in 40 markets via credit lines of Bt10,000-Bt100,000 carrying an interest rate of 28 per cent per year - the same as personal loans.
The income of vendors is interesting. Some make Bt100,000 a month but have no bank account, so they have to turn to loan sharks when they need credit.
Half of the surveyed vendors said they required money for working capital and 95 per cent of them have to borrow from underground lenders.
The company spent a huge amount on loan-approval and debt-collection systems and human resources to prevent fraud from its staff and borrowers.
The company says its non-performing loans from microfinance are at an acceptable rate.
The key driver of loans at CFG Services is truck and tractor refinancing, which helped its portfolio grow by 126 per cent last year. Truck refinancing jumped to Bt1.5 billion from Bt650 million in 2011.
This year the focus will be on tractor-purchase financing because there are few players. Farmers are changing over from ploughs to tractors to harvest their crops, which will spur demand for financing in this segment.
The company targets outstanding loans at Bt9.3 billion this year, up from Bt6.5 billion last year.
It is seriously studying expanding to Laos and Cambodia, but it will not enter the markets until it understands the regulations and the actual demand for microfinance, Tanyapong said.