Thailand: Lenders queue up for chance to offer digital loan service

The provision of digital personal loans has been expanding in response to the financial behaviours of consumers in the digital era, creating opportunities for low-income earners to access financial sources.

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

Of the total, five have already been operating such businesses, while the other four are tweaking their business operating processes to fit completely with the central bank’s requirements.

Besides these, three more applicants are waiting for the central bank to approve the granting of a licence, said the central bank’s senior director Suwannee Jatsadasak.

As of July this year, digital personal loans outstanding 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 5,000-6,000 baht per borrower.

The central bank introduced the digital loan licences in 2019, with the aim of helping borrowers who neither have a regular income nor collateral to better access credit from formal financial institutions.

The maximum loan repayment period is six months and there is no limitation in terms of the reasons for borrowing. The ceiling of the interest rate charge is 24% per year.

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

Ms Suwannee said some lenders focus on the underbanked and unbanked, providing a greater opportunity to these groups to gain better access to loans with reasonable interest rates.

She added that when it comes to the use of alternative data when evaluating personal digital loan approval, all lenders must comply with the central bank’s regulations and market conduct.

Kattiya Indaravijaya, chief executive of Kasikornbank (KBank), said the bank has offered digital loans to 4 million customers after starting the digital loan business two years ago.

The bank offers loans via different business licences through several digital platforms and business models under KBank group’s digital loan service.

“Individuals and entrepreneurs are the key market segments of the digital loan service. The bank has been expanding the service to serve the underbanked and unbanked segments, which have more room to grow. As well, we can help them better access the loan service,” she said.

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

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

Under a partnership or JV deal, the bank will collaborate with partners to build 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.