In 2014, eight million households or one-third of the total Thai households had insufficient income to cover their living costs and were forced to take out informal loans to cover payments, such as school fees and medical costs. While the daily minimum wage has increased over the past few years, debt remains a problem for most households: a 2018 study by the University of the Thai Chamber of Commerce (UTCC) revealed that informal loans represented more than 34% of debts of low-income workers earning less than THB15,000 ($478) a month.
Borrowing from the bank is impossible for those with unpredictable and unstable incomes and little or no collateral, forcing them to turn to loan sharks. Low financial literacy leaves borrowers unable to assess their own debt repayment capacity – a situation exacerbated by the high and constantly rising interest rates imposed by the loan sharks.
A lack of financial discipline puts further stress on the level of precariousness with those who can least afford to spend on consumer goods doing precisely that. The borrowers ultimately fall into a trap of debt rollover, taking out more loans to pay off other more urgent debts.
Serving under-banked Thais
It is this vicious cycle that microfinance company Ngern Tid Lor has set out to break. With more than three decades of experience in the provision of loans, particularly in the vehicle title loan business, the company has established itself as the leader in providing financing to Thailand’s low-income population. Its mission is straightforward and uncompromising: to make fund sourcing faster, simpler and more approachable, helping those most in need to achieve peace of mind and the hope of a better future.
Ngern Tid Lor offers affordable interest rates and gives its clients copies of their loan agreements and receipts for payments – a procedure not normally followed by other local finance providers. It also provides clients with financial education, based on the training materials designed to fit the learning needs of its target customers, and sets out to help clients to acquire financial literacy and financial discipline.
Making insurance affordable
In addition, Ngern Tid Lor has modified its motorcycle title loan to include personal accident insurance coverage, free of charge. Every borrower receives a policy with THB200,000 coverage, the kind of protection and security its customers never imagined was possible. This follows from the success of a 2014 campaign that Ngern Tid Lor initiated free accident insurance coverage by giving out 30,000 policies worth THB12m to motorcycle customers.
The overwhelmingly positive response encouraged Ngern Tid Lor’s management to redefine its role in improving borrowers’ lives. Seeing the opportunity to further service this under-banked segment of the population, it is determined to expand its non-life insurance-brokering business to cover auto insurance, compulsory auto insurance and personal accident insurance as well as cancer coverage. To help customers who don’t have credit cards or those who are unable to affordable a lump sum premium, Ngern Tid Lor offers an auto-insurance six-month installment plan at 0% interest with instant coverage, thus mitigating the financial burdens caused by accidents.
“We believe that helping customers and making a profit go hand in hand. Our example sets higher standards for other players,” explains Piyasak Ukritnukun, Managing Director of Ngern Tid Lor.
Ngern Tid Lor currently has more than 800 branches across Thailand and serves over 450,000 customers. Most of them are self-employed without steady incomes, thus unable to get financing from banks. Average loan size has come down over the past few years but the client base has increased. The company’s NPL ratio is also surprisingly low, less than 2%.
“When people don’t have credit, they work hard to preserve it. Most people are well-intentioned and are willing to pay back their loans,” Mr Ukritnukun said, adding that clients treated with dignity and respect are more likely to refer others.
“In our business we used to say we produce loans, now we say we deliver opportunities,” he continued.
To promote financial opportunities that are fair and transparent and in line with the highest standard of practice, Ngern Tid Lor has invested heavily in brand building over the past few years, adopting the tagline “Life rolls forward” to symbolise its market leader status as a vehicle title loan provider and non-life insurance broker. In 2019, Ngern Tid Lor is expanding access to its services by opening 200 new branches, bringing the total of 1,000 by the end of the year.
“We believe that access to fair, transparent, and responsible financial services is everyone’s right. We are a company that cares. Our role in the grand scheme of things is to create opportunities for our employees, our customers, our partners, and others in society to have a chance at sustainable success and I believe that we have been successful. And, in the long run, it supports the sustainable development of Thailand’s economy,” Mr Ukritnukun concluded.