Lenders line up for chance to offer digital loan service

Options open to low-income people

A smartphone displays the apps of several Thai banks offering mobile loan transactions. VARUTH HIRUNYATHEB

The supply of digital personal loans has grown in response to consumer financial behaviors in the digital age, creating opportunities for low-income people to access financial sources.

The Bank of Thailand has granted digital personal loan licenses to nine service providers, including banks and non-banks.

Of the total, five are already operating such businesses, while the other four are fine-tuning their operating processes to fit perfectly with central bank requirements.

Besides these, three other applicants are waiting for the central bank to approve the licensing, said central bank senior director Suwannee Jatsadasak.

As of July this year, outstanding digital personal loans stood at around 5.9 billion baht, representing 1.8 million loan accounts.

Loan approvals average 400 million baht per month with a credit line of 5,000 to 6,000 baht per borrower.

The central bank introduced digital lending licenses in 2019, with the aim of helping borrowers who have no regular income or collateral better access credit from formal financial institutions.

The maximum repayment period of the loan is six months and there is no limitation as to the reasons for borrowing. The interest charge ceiling is 24% per annum.

Lenders can leverage alternative data, such as borrowers’ utility and mobile phone bill payment behaviors, income and spending on e-commerce platforms, in their assessment of capacity or borrower’s willingness to repay the loan.

Ms Suwannee said some lenders are focusing on the underbanked and unbanked, providing a greater opportunity for these groups to have better access to loans at reasonable interest rates.

She added that regarding the use of alternative data when assessing the approval of personal digital loans, all lenders must comply with central bank regulations and market conduct.

Kattiya Indaravijaya, managing director of Kasikornbank (KBank), said the bank offered digital loans to 4 million customers after launching the digital lending business two years ago.

The bank offers loans through different business licenses through multiple digital platforms and business models under the KBank Group Digital Lending Service.

“Individuals and entrepreneurs are the key market segments for the digital lending service. The bank has extended the service to serve the underbanked and unbanked segments, which have more room for growth. Plus, we can help them to better access the loan service,” she said.

The bank has a large customer base of individuals and small and medium-sized businesses. The lender has around 10 million people on the radar as targets for its digital lending services.

Ms. Kattiya said the partnership strategy and a joint venture (JV) business model would incentivize the bank to further expand the digital lending service.

Under a partnership or joint venture agreement, the bank will work with partners to create an ecosystem or set up a digital platform to offer a full range of financial services, including digital loans , to all related parties, she added.

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