Rice scheme hurting hire-purchase lenders

Economy February 24, 2014 00:00

By Sucheera Pinijparakarn
The Na

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Firm giving loans for harvesters may need to diversify

Hire-purchase lenders in passenger vehicles and commercial vehicles segments have considered reviewing their business plans after the end of first quarter or at least in April if the lending demand is not fully recovered.
According to the Federation of Thai Industries, new auto sales in January plunged 45.5 per cent to 68,508 units from December. Yet, Thai Hire-Purchase Association Chairman Anuchart Deeprasert said January and February is the low season of car sales, and hire- purchase business in the first two months can be slow.
Based on the expected vehicle sales this year of 1.1 million units from 1.32 million units last year, the auto loan business this year is expected to drop by 10-15 per cent from the year before, he said.
Earlier, the association expected total vehicle sales in the first quarter will be 300,000 units but the political uncertainty had badly hurt the buyers’ sentiment and sales in the first quarter might drop to 200,000 units, Anuchart said.
Vehicles sales should resume in the second quarter but if figures still indicate a slowdown, it would mean the auto market is in an unusual situation and auto producers may have to adjust their strategies. If that happened, it may also convince hire-purchase lenders to adjust (strategies), he said.
Rice payments doubt hits firm 
To commercial vehicle lender G Capital, the uncertainty on when rice farmers will be paid by the government may make the firm review its loan target, managing director Santi Hokittikul said.
G Capital extends loans to people wanting to buy rice combine harvesters. And Santi said if the payment to farmers in the rice scheme was delayed for a prolonged period the company may review its loan growth target of 15 per cent from outstanding loans of Bt892 million.
Even if the company did not provide further loans to farmers, delays in payment farmers for their rice would hit its business, as farmers who are customers of G Capital would not be able to pay for harvesters they have ordered. They would have to ask for the terms of their loans to be extended until they get their money.
The company is optimistic that the upcoming double-crop field will help generate revenue to rice combine harvester customers and when they got revenue, they will pay back to the company. 
He said that the company would try to diversify risk from only giving loans for rice combine harvesters by giving loans to people in the cane and palm industries.
“We are exploring quality cane and palm harvesting machine and talking to manufacturers about quality products that will help cut loan risk. We will also negotiate with manufacturers about repurchase policies in case our borrowers are unable to pay due instalments, as we don’t have a policy in repossess machines as inventory,” he said.