Government Savings Bank (GSB), the country’s biggest state-owned lender, will start accepting vehicles as collateral for the first time in its 107-year history, as more individuals seek small-ticket loans amid the nation’s worst economic crisis on record.
GSB is moving into an market pioneered by Muangthai Capital Plc and Srisawad Corp Plc, which tapped into an under-served base of customers, mostly in rural areas, who need quick cash and have motorcycles or pickup trucks as their most-liquid asset. Muangthai’s average loan is 15,000 baht.
GSB will establish a joint venture in early 2021, with the partnership helping bypass potential bureaucracy of being a state enterprise, said President Vitai Ratanakorn. The bank will still be able to tap into its 1,000 branches and 21 million customers, he said, without identifying any potential partners.
“This is an attractive lending business with a wide interest-rate margin,” Mr Vitai said in an interview at his office in Bangkok. GSB’s ventures will offer loans at rates as much as 10% cheaper than other firms to attract new borrowers, he said.
GSB’s new venture will also offer some unsecured low-rate loans, as part of the government’s mandate to tackle income inequality, he said.
Krungthai Card Plc, the nation’s biggest credit-card company, also recently started offering consumer loans with motorcycles and automobiles as collateral.
“The microfinance market is vast,” said Kittima Sattayapan, an analyst at SCB Securities. Even if GSB cuts rates, “we see only a small chance” that current lending leaders will be disrupted, she said.
The Stock Exchange of Thailand’s gauge of full-service banks has dropped 40% the past year, compared with declines of 6.9% for Muangthai Capital and 14% of Srisawad.
Muangthai Capital Chairman Chuchat Petaumpai told an investors meeting on Thursday that he expected more competition because of his company’s success. Net income in the first half of this year jumped 24% to 2.5 billion baht, with the average lending rate at 22%, according to a company presentation.
Muangthai has about 4,500 branches and the stake of Mr Chuchat’s family is worth about $2.4 billion (75 billion baht), according to data compiled by Bloomberg.
GSB is owned by the Finance Ministry. It has assets of about 2.8 trillion baht, according to its website. Mr Vitai rejoined the GSB as president in July, after spending the previous two years as secretary-general of the Government Pension Fund.