Sarinee Achavanuntakulwww.salforest.com
23 July 2018
Pursuing Retail Banking with Social Responsibility
Research supported by
Responsible retail lending: World Bank Good Practices
• Institutional arrangement: oversight should not be fragmented
• Disclosure: all information in understandable terms
• Fair and reasonable selling practices
• Protection of consumer confidentiality
• Consumer redress
• Financial capability: should promote financial education and awareness
New Zealand
2
Cases of “irresponsible lending” in Thailand
3
Loans Deposits
Source: Bank of Thailand, May 2018
Cross-sell Financial
officer
behavior
Others Total
2016 2017
Complaints filed with Bank of Thailand Hotline (1213)
4
Challenges & weaknesses in consumer protection
Victim of identify theft
Source: Thairath, January 2018
Source: Sustainable Banking Thailand research, January 2018
• Many banks still state “will not be responsible for data leakage”
• Still vague personal data retention & safety policy
• No personal data protection law in force in Thailand
Some characteristics of Thais’ debt situation
• Of households currently with outstanding debt (44%), 38% of these believed that they were over-indebted.
• At least 12% of loans are taken out in order to repay other debts. • Farmers (62%) are the most indebted group in Thailand followed
closely by government employees (59%). • Informally employed such as farmworkers and domestic workers (60%+
of Thai labor force) are only able to borrow small amounts through mostly informal sources.
• Seasonality of income of many jobs, e.g. farming, requires more flexible timing of loan disbursement and repayment.
• 64% of individuals save less than THB 2,000 per month. • Over 2 million “solo entrepreneurs” in Thailand.
5Source: FinScope Survey, 2013
6Source: FinScope Survey, 2013
Supply of ‘microfinance’ in Thailand
7Source: Fiscal Policy Office, 2016
▪ Bank of Thailand definition of ‘microfinance’ (2011): No more than 200,000 Baht loan, interest rate no more than 28%
Overall Thailand financial inclusion: 2016 vs. 2013
8Source: Bank of Thailand, 2016 Financial Access Survey
Access to loans: only 41.6%
9Source: Bank of Thailand, 2016 Financial Access Survey
Distance to touch points in Thailand: Rural vs. Urban
Source: FinScope Survey, 2013 10
Financial inclusion challenges in Thailand
11Source: Fiscal Policy Office, 2016
12
FinTech diversity and scope
13
Integrating financial literacy into service: ex. Simple
14
FinTech w/ financial literacy: ex. Metromile & DenizBank
15
Info from: PayPal, Amazon, QuickBooks etc.
16
• Thai people feel “stressed” when managing money. Many people know
how to do household accounting, but feel stressed to see “just red
figures”
• Thai people put little emphasis on long-term saving
• Lack of understanding (also confusing terms) hamper responsible
borrowing. Little awareness of consumer rights and grievance channels
• For low-income segment, “low periodic payment amount” is the most
important to them; willing pay high (informal) interest rates if required
• Require greater flexibility on loan repayment schedules to fit income
flows
Financial literacy begins with understanding needs
17
• Financial inclusion in Thailand should be seen as a business
opportunity: potential 8-10 million new clients, most Internet-savvy
• Opportunities for new and better-tailored products
– To encourage long-term savings, e.g. integrate National Pension Fund with
existing village fund and saving groups networks
– To help better cope with risks, e.g. insurance against crop failures
– To design better debt & debt management tools to prevent runaway debt
• Stand-alone financial education tools / CSRs are not enough; need
proper incentives and integrate education into product delivery to
create financial capabilities
Some take-aways – for financial institutions / FinTech
18
• Responsible lending rules should be delineated and enforced,
including penalties for violations (Bank of Thailand’s market conduct
regulations which come in force in January 2018 should help with this)
• Challenge 1: how to safeguard and protect privacy, give consumers
control of their data, while encouraging financial innovation
• Challenge 2: how to encourage financial institutions to lend
responsibly AND increase financial literacy in the same product design
process (not separately as product & CSR)
• Challenge 3: how to increase financial inclusion in Thailand, not
worsening inequality or ingrained prejudices (e.g. via bad algorithms)
Some take-aways – for regulators
19
Importance of disclosure: banking sector fines in UK
20
For more information:
www.salforest.com/banking
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02 258 7383