Deal focus: Olympus backs big plans for Thailand's smallest bank

Thai Credit Retail Bank is Thailand’s smallest mainstream lender but also claims to be the fastest-growing. Expansion is driven by deepening penetration of an underserved microfinance space comprising the likes of wet market vendors, small traders, and food stall owners.

The bank, which has a loan book of more than $1.5 billion, has approximately 400 branches nationwide, but only 20 take retail deposits. The rest are kiosk-style operations spread across the country – typically with between three and 10 staff – that proactively reach out to micro small and medium-sized enterprises (SMEs) and self-employed individuals that cannot visit them.

“The field staff covers these micro-enterprises by collecting whatever information is available and supplementing through field visits. Most times, by sitting in a shop as well as interacting with neighbors, you get a great feel for the setup, the flow of customers, and the amount of business being done. Thai Credit has mapped out all the wet markets in Thailand, identified which ones it wants to cover, and even which customers it wants to focus on,” says Gaurav Malik, a managing director and head of the financial services group at Olympus Capital Asia.

Olympus has acquired a 25% stake in Thai Credit for $91 million and believes it can double the size of the loan book within five years. The bank is already the largest player in a micro SME loans segment, accounting for about 50% of a formal market worth a few billion dollars (the entire microfinance lending industry is said to be worth less than $1 billion). Informal lenders – among them loan sharks charging 1% interest a day – are still the dominant force.

The arrival of Olympus has facilitated an exit for Northstar Group, which invested in Thai Credit in 2012 when the loan book was around $700 million. The bank was founded in 1970 and experimented with various business models – it secured a retail banking license as recently as 2006 – but made little headway in segments well covered by larger players.

The switch to microfinance and micro SME lending came in 2013 and this was the key to Thai Credit turning profitable, with net income reaching THB771 million ($25 million) last year. SME loans, often used to meet working capital needs or buy equipment, start at THB10 million. Micro SME and microfinance loans vary dramatically in size based on the nature of the customer and the tenor. Three-year loans range from THB5 million for SMEs with sales of at least THB80 million to THB1.5 million for a small-scale 7-Eleven franchisee to as little as THB100,000 for less proven borrowers.

Olympus has seen microfinance and micro SME lending gain traction in India, leveraging this growth through CreditAccess Asia. CreditAccess was an equity investor in India-based Grameen Koota, but took control of the microfinance institution in 2012, restructured it as an operating entity with underlying subsidiaries, and subsequently launched in Indonesia and the Philippines. Olympus invested $30 million in 2016 to support a wider roll-out and sees considerable potential across Southeast Asia.

“The dynamics are similar – underbanked customers that traditional banks don’t want to cover due to cost, loan size and customer base considerations,” says Malik. “Having a bank account doesn’t mean you are a banked customer; it’s about having access to credit and other financial services, such as insurance.”

The more immediate priorities for Thai Credit include digitization. At present, credit is transferred into the borrower’s bank account or dispersed as cash. There are plans to introduce an e-wallet, which would involve the creation of a revolving facility that the borrower draws upon when necessary rather than having the cash sit idle. This makes sense for merchants that need capital to buy produce on a daily or weekly basis and then repay it when the cash comes in from sales.

Technology can also be useful in streamlining Thai Credit’s processes and systems. “We want to use technology to enhance customer experience and use non-traditional sources of data in our evaluation – for example, data on ownership of hard assets like fridges or scooters, or data on mobile phone records. This could improve credit quality and the underwriting of loans, and in turn, bring down operating costs and credit costs,” Malik says.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Southeast Asia
• Financials
• Expansion
• Olympus Capital Holdings Asia
• Thailand
• Financial Services