CIMB THAI BANK is planning to resume offering personal loans to people with a monthly income of less than Bt15,000, as it believes its selective strategy and credit scoring are strong enough to guard against rising non-performing loans (NPLs) from this ca
Onanong Udomkantong, executive vice president for retail loan products, said yesterday that people with monthly incomes below Bt15,000 used to be a risk category for the bank because of rising bad debt, causing CIMBT to shift its personal-loan focus in recent times to individuals earning more than this amount.
The bank’s NPLs for personal-loan business currently stand at 3.8-3.9 per cent of outstanding lending.
The bank will be testing the segment of people with monthly income of less than Bt15,000 by year-end, and it expects to launch a personal-loan product for this category officially during the first quarter of next year, she said.
CIMBT targets both salaried customers and the self-employed, especially vendors, as it wants to help bring them into the financial system. The interest rate offered to these customers is set at 28 per cent per annum, in compliance with central-bank rules, Onanong said.
However, the rate – while quite high – is still much lower than what is charged by loan sharks, she said.
Personal loans for these types of customer are similar to microfinance, but the bank has to have a solid credit-verification system in place to ensure that lending does not lead to rising bad debt, as happened before, she added.
Before its planned refocus on people with monthly income below Bt15,000, the bank has recently developed two new personal-loan products in line with its selective strategy.
The aim is to capture customers with monthly income of Bt20,000-Bt30,000 and those bringing in at least Bt30,000 by offering annual interest rates of 18 and 15 per cent respectively.
Such customers have to have shown good financial discipline and require money for long-term planning, she said.
Customers are told that good financial discipline should equate to a lower rate on repayments, which is what CIMBT is offering them, she explained. The bank anticipates that the level of NPLs from its selective-customer strategy will not rise above 1 per cent.
It hopes to provide lending of Bt5 billion from the two new loan products and attract 30,000-50,000 customers to add to its current 140,000 borrowers.
The bank is confident of achieving these targets as the rate of 15 per cent for those earning Bt30,000 a month is the lowest in the personal-loan market, she said.
CIMBT projects total outstanding personal loans of Bt13 billion by year-end, from Bt9.5 billion at present.
Onanong added that although the domestic economic situation was much improved from the first half of the year, competition in the personal-loan market was not expected to intensify to any significant degree, as the overall high level of household debt was still a worry for lenders.