STREAMLINED, LOW-COST DIRECT-SALE SYSTEM SET TO DOMINATE RETAIL LENDING
KIATNAKIN BANK is embracing something called “alternative distribution” to drive retail lending in the hope that this channel will become a powerful loan contributor in three years.
KKP set up an alternative distribution channel (ADC) more than a year ago to offer retail loans directly to customers. ADC agents contact customers directly by telephone.
The bank set up its ADC system in November 2015, after observing from similar systems overseas that the cost structure is lower than that of traditional branches.
The ADC unit started giving loans in February last year and reached Bt5 billion for the year, Aphinant Klewpatinond, president and chief executive officer, said yesterday.
The bank uses ADC to acquire customers for personal, mortgage and micro SME loans, including so-called SME Car3x loans. This product is available to small and medium-sized enterprises that own vehicles. An SME can use three of its vehicles as collateral when applying for a loan.
Last year, KKP’s overall loans contracted slightly by 0.8 per cent versus the drop of 3.6 per cent in 2015. However, ADC helped personal loans expand by 105 per cent, housing loans by 289.5 per cent and micro-SME loans including SME Car3x loans by 90.7 per cent.
The bank aims for loans from this channel to double from Bt5 billion, as it did in the year before. It will boost its direct sales force by 400 representatives from 600 currently.
Last year, retail loans stood at Bt123.71 billion, of which Bt113.05 billion was instalment loans, followed by personal loans at Bt4.24 billion, home loans at Bt3.69 billion and micro-SME loans of Bt2.73 billion.Retail loans account for 70 per cent of its portfolio of Bt176.46 billion.
“We will use ADC to drive personal loans from the salaried segment, while we will give credit based on the debt ratio. We target overall non-performing loans this year at no more than 5.2 per cent, down from the existing 5.6 per cent,” he said.
ADC should be the main channel for retail lending. The branch today is not a channel for acquiring instalment-loan clients, as most customers will apply for this kind of lending at car dealers. And for mortgages, housing projects have become the front channel to lure customers.
“Several foreign financial institutions that do not have many branches have embraced the ADC model to acquire customers. KKP has just copied this model from overseas, as we believe that it is a suitable channel to acquire new customers, while the branch is suitable for growing the existing customer base,” Aphinant said.
KKP targets loan growth of more than 5 per cent this year, driven by retail loans. However, it will select the segment to grow in order to tackle new NPLs.
The bank will launch a cash card in March as a new product for personal loans and a portfolio for property financing in the middle of this year.
“The bank remains more cautious with the SME and personal-loan segments, so we have to select the growth segment with potential.
“SMEs that are property developers have not given a recovery sign yet. It is a segment that KKP has to monitor further,” he said.