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Pursuing retail banking with social responsibility


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"Pursuing retail banking with social responsibility" by Sarinee Achavanuntakul. Presented at Sustainable Banking Conference, Bangkok, Thailand, 23 July 2018

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Pursuing retail banking with social responsibility

  1. 1. Sarinee Achavanuntakul 23 July 2018 Pursuing Retail Banking with Social Responsibility Research supported by
  2. 2. 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
  3. 3. 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. 4. 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
  5. 5. 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
  6. 6. 6Source: FinScope Survey, 2013
  7. 7. 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%
  8. 8. Overall Thailand financial inclusion: 2016 vs. 2013 8Source: Bank of Thailand, 2016 Financial Access Survey
  9. 9. Access to loans: only 41.6% 9Source: Bank of Thailand, 2016 Financial Access Survey
  10. 10. Distance to touch points in Thailand: Rural vs. Urban Source: FinScope Survey, 2013 10
  11. 11. Financial inclusion challenges in Thailand 11Source: Fiscal Policy Office, 2016
  12. 12. 12 FinTech diversity and scope
  13. 13. 13 Integrating financial literacy into service: ex. Simple
  14. 14. 14 FinTech w/ financial literacy: ex. Metromile & DenizBank
  15. 15. 15 Info from: PayPal, Amazon, QuickBooks etc.
  16. 16. 16
  17. 17. • 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
  18. 18. • 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
  19. 19. • 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
  20. 20. Importance of disclosure: banking sector fines in UK 20
  21. 21. For more information: 02 258 7383