Bank of Ayudhya's (BAY) car refinancing arm Srisawad Ngern Tid Lor (Money on Wheels) plans to launch a nanofinance service next month targeted at existing customers who are wet-market vendors.
The company has already received the business licence from the Bank of Thailand, but is waiting for approval from the Commerce Ministry under the Foreign Business Act as its Bank of Tokyo Mitsubishi UFJ owns a 76.88% stake in BAY, managing director Piyasak Ukritnukun said, adding that the ministry's green light is expected next month.
Ngern Tid Lor has not set an aggressive growth for the new business because it needs to test the market by focusing on the existing customers of its microfinance service under the fresh market loans.
However, the credit line of nanofinance borrowers will be lower than that of microfinance clients.
On average, the credit line of each wet-market borrower under the microfinance service is 30,000 to 35,000 baht with a maximum credit line of 300,000 baht.
The Bank of Thailand has set the maximum credit line of nanofinance services at 100,000 baht per borrower.
Even though low-income earners are struggling with high debt, a number of companies have expressed interest in branching into nanofinance as they consider it a new growth area.
"Nanofinance carries higher risks and operational costs, but with the ceiling rate capped at 36% per year including other fees, we need to find a suitable formula for the new business operation though we will apply our fresh-market loans to the new service. However, there are greater opportunities in the business segment and it will help self-employed people access financial sources at reasonable prices," he said.
Ngern Tid Lor expects its microfinance loan portfolio to grow to 16 billion baht this year, rising from 13.8 billion last year.
It aims for the number of customers to increase to 210,000 by the end of this year from 150,000 last year. It plans to open 60 new branches, bringing the total number of branches to 383 this year.
From the beginning of this year, its lending portfolio rose 12.3% to 15.5 billion baht, of which almost half is for cars and pickup trucks, 40% for trucks, 10% for motorbikes and the rest for wet-market loans.
The company expects non-performing loans to stand at the current level throughout this year. Bad loans climbed to 1.26% of outstanding loans from 0.9% at the end of last year.
