Sarinee Achavanuntakul www.salforest.com 23 July 2018 Pursuing Retail Banking with Social Responsibility Research supported by
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:
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