Krungsri Consumer commenced nano-finance operations last month after receiving a licence to run such a business from the Bank of Thailand last year.

The company spent much time studying the most appropriate model for running nano-finance, and decided to base its system on BRI’s version, as the Indonesian bank’s good practice has enabled its microfinance business – which accounts for around 32 per cent of its loan portfolio – to keep non-performing loans (NPLs) below 2 per cent for 10 consecutive years.

Nayanee Peaugkham, managing director of Krungsri Consumer, said the company had adopted BRI’s practice of paying a portion of interest in the form of a cash-back to good-discipline customers, as BRI had found that doing so not only encouraged more customers to apply for nano-finance, but also attracted clients with a better repayment discipline.

Nano-finance is a form of unsecured lending, hence it poses a higher risk for loan providers than other kinds of lending.

“We hope the interest cash-back for good-discipline customers, which we are applying based on the BRI model, will help us to control our nano-finance NPLs,” she said.

Nayanee added that the company expected its nano-finance lending to result in NPLs of no more than 8 per cent, higher than the 3.3-per-cent level for the Krungsri First Choice personal-loan product, which is one of Krungsri Consumer’s core businesses.

The cash-back will be in the form of 10 per cent of the interest paid by customers who repay their debt on time for six consecutive months.

Krungsri Consumer has also designed a feature of its own in regard to customers with a good repayment record for at least one year, with such clients being eligible for cash of up to 100 per cent of the revolving credit approved by the company, she explained.

The company’s nano-finance cash card can be used at all automated teller machines with the ATM Pool sign. Customers can also use the additional credit for buying goods and services on instalment terms for their businesses at special interest rates at more than 20,000 shops that are merchant partners of Krungsri First Choice, she said.

Krungsri Consumer wants to become one of the country’s leading players in nano-finance after adopting the BRI model, the managing director said, adding that in Thailand, there were now 21 nano-finance providers in the market out of 27 operators that received licences from the central bank. Some operators are not implementing their nano-business because they acknowledge that it is a somewhat risky venture, as many customers who are small vendors are unregistered businesses and their sales fluctuate dramatically, and the operators are yet to work out a suitable model to manage the risk, Nayanee said.

The 21 active nano-finance operators have some 26,000 accounts among them, creating lending of Bt622 million.

As to the Tao Kae Tan Jai nano-finance brand, Krungsri Consumer aims to attract 5,500 new customers with a total credit value of Bt170 billion next year.

“Nano-finance poses a high cost, as we have to send out a team to introduce the lending product and then another team of what we call ‘field checkers’ to follow up with customers. However, we have attempted to manage the cost by issuing a card to nano-finance borrowers.

“The card will show the due date of repayment as a reminder to borrowers, and has a barcode that they can show for payments made at Krungsri branches and 7-Eleven convenience stores nationwide, at no extra charge,” Nayanee said.

Meanwhile, the means of debt collection for Krungsri Consumer’s Tao Kae Tan Jai operation will be different from that for Ngern Tid Lor, another microfinance arm of Bank of Ayudhya – the parent of Ayudhya Capital Services/Krungsri Consumer – which also operates in the nano-finance area, she said.

Nayanee added that the parent bank wanted Krungsri Consumer and Ngern Tid Lor to follow different styles in order to test its two nano-finance operations and find the most suitable model for conducting such business in Thailand in the long run.