Hi-Way, which provides car-title loans under the Somwang Ngern Sang Dai brand, developed the Somwang Sabai Jai product last year, but decided to tone down this form of lending at the beginning of the second half of this year after learning that the government planned to introduce pico-finance for low-income earners, managing director Supachai Boonsiri said.
Somwang Sabai Jai currently has a loan portfolio of Bt200 million, which is deemed sufficient for controlling operating costs, he said.
Prevailing economic conditions were another reason for Hi-Way to slow down its micro-finance, as this type of lending is unsecured and the company might face rising operating costs from debt collection from borrowers who are small vendors, he explained.
While the cost is under control if a customer repays debt when the company sends a reminder alert, it rises beyond the target level if Hi-Way has to dispatch on-the-ground staff to pursue repayment.
Therefore, Hi-Way needs to review its micro-finance plan and be clear about the full conditions for operating a pico-finance business before deciding its next step, Supachai said.
Hi-Way will apply for a licence if it is able to lend to customers who work in a province where the company has an office, while the customer’s household registration is in another province.
However, if the pico-finance licensing conditions do not allow allowing operators to lend across provinces, Hi-Way might opt to take another look at its operations to see what it can do to enhance the way it controls risk and customer behaviour within the terms and conditions of its micro-finance licence, he said.
Tisco Bank, however, wants Hi-Way to focus on car-title loans and expand the vehicle segment to achieve the target set for the business over the next three to five years, he pointed out.
During the period, Somwang Ngern Sang Dai aims to have outstanding loans of Bt15 billion, compared to an estimated Bt8 billion this year, the managing director said.
About 95 per cent of its portfolio currently relies on four-wheel vehicles, he said, adding that to achieve its target, Hi-Way will attempt to expand its lending to fleet cars and motorcycles, which it hopes will account for 10 per cent and 25-30 per cent, respectively, within three to five years.
Auto-title lending entails taking out a short-maturity loan, under which customers can repay all the debt before the end of the term, which many choose to do.
The company therefore has to acquire new accounts to maintain its portfolio and expand its branch network to cover the whole country, he said.
Hi-Way targets having 300 branches within the next three to five years – double the current number.
Last year, Hi-Way missed its outstanding-loan target of Bt8 billion because many customers repaid their debt before maturity, leaving it with outstanding lending of Bt6 billion at the end of December, Supachai added.