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

www.facebook.com/SustainableBankingThailand

info@salforest.com

02 258 7383