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TCRB to branch out into microfinance

Roy Gunara

Roy Gunara

With strong growth in lending to small businesses, bank to explore new area

Thai Credit Retail Bank, the country's only retail banking institution, is considering entering the microfinance sector, managing director Roy Agustinus Gunara said last week.

TCRB has spent time building up a portfolio of mainly small businesses, which is expected to drive the ratio of its small-business lending more than 60 per cent over the next three years, from the current level of 18 per cent.

The small-business lending portfolio now stands at Bt3.5 billion - against just Bt5 million last year - due to the bank's aggressive focus on the segment, where it offers small firms credit lines of Bt1 million to Bt5 million, he said.

To support growth in this segment, TCRB is developing lending offices in local commercial and community areas that offer only loans. Its full branches, meanwhile, are in charge of deposit mobilisation, lending to other customers and bancassurance.

Gunara said these lending offices also involved lower operating costs than full branches.

The latter require an investment of Bt3 million-Bt5 million apiece and a staff of nine or 10 people, while the equivalent figures for a local lending office are about Bt1 million and four staff.

The lower investment cost allows the bank to set up more lending offices in remote areas, he said.

"We can break even from a lending office within 12-15 months, against 25 months at full branches," he added.

TCRB plans to open a further 20 commercial and community lending offices next year from its current network of five such operations, and will increase the number of local relationship managers from the present level of 150 to 350.

Gunara said the location of lending offices in local communities would reinforce the relationship between the bank and targeted customers, and that the lending offices would be adapted for lending to microfinance customers, as well.

While microfinance lending is not new for the Thai banking industry, it is a new area for the bank, he said.

TCRB, therefore, has to understand the nature of microfinance well and build the infrastructure to support risk management, as microfinance entails unsecured lending and customers do not have bank statements.

The credit line for microfinance should not more than Bt150,000 per customer, and the interest charged should be no more than 35 per cent per year, he added.

Within the next three years, TCRB aims to have total outstanding loans of Bt60 billion, from Bt20 billion at present.

Shareholders are ready to inject new capital to support this level of growth, even though last year they recapitalised the institution by Bt500 million to Bt2.5 billion, he said.

When growth in its small-business lending is stable enough and the balance sheet is strong, TCRB might consider upgrading itself to a commercial bank, he said.

Gunara added that lending to small businesses was not adding to household debt because businesses required funding to support their investment, which in turn helped generate incomes for those involved.

Lending for consumption rather than business purposes, however, drives up household debt because borrowers use the money for their spending, he added.

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