Krungsri Leasing Services, a joint venture between Bank of Ayudhya's financial units and a Laotian car-loan lender, expects to commence auto and personal loan operations in Laos in December.
The company is awaiting approval from Laos's central bank after getting the nod from the Bank of Thailand earlier.
It stands ready to introduce the first two consumer loan products _ auto loans for new cars and hire-purchase loans for electric appliances and mobile phone handsets _ to Laotian customers.
The investment in Laos is Bank of Ayudhya's first foray outside its home turf to test other Asean markets before the Asean Economic Community kicks off in late 2015.
Ayudhya Capital Services and Krungsri Auto each own 35% of Krungsri Leasing Services and the local partner Unity Capital the rest.
As it is in the early stage of regional expansion, the company will focus on risk management.
Thakorn Piyapan, the managing director of Ayudhya Capital Services, said for car loans, the company will set a minimum salary requirement at 10,000 baht a month, with government officials the main target group.
"Even though 90% of Laotian consumers use cash for car purchases, our auto loan service will help to develop the country's financial market in the long run. We also see greater business opportunities in the neighbouring country," he said.
The company plans to lend 820 million baht to more than 1,200 accounts to car buyers by the end of next year.
For hire-purchase loans for electrical appliances, the company sets the minimum salary of 6,000 to 8,000 baht a month and offers term loans up to 12 months.
For this portfolio, it targets 4,000 accounts with outstanding credit of 80 million baht by the end of next year.
To comply with its stringent risk management, the company requires at least 20-30% of the product value for down payment of both auto and hire-purchase loans for electrical appliances.
Since Laos is a cash-based economy, zero-rate campaigns for electrical-appliance personal loans are needed to promote consumer finance.
Apart from Krungsri Group, Japan's Aeon Group will also start providing consumer loan service in the neighbouring market in December.
Mr Thakorn said loan analysis and approval systems are a hybrid-system designed by both partners. The local partner has 10 years' experience in Vientiane, while Krungsri's know-how and technology will facilitate sustainable growth.
About the author
- Writer: Somruedi Banchongduang
Position: Business Reporter