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Vietnamese are very responsible debtors’
Interview with Ivo Slanina, Country Manager of Home Credit Vietnam
March 3, 2017: Being one of the very first foreign finance companies to enter the Vietnam market, Czech-invested Home Credit Vietnam Finance Co. has recorded impressive achievements. The company now has a distribution network of 7,000 points-of-sale across Vietnam with 10,000 employees who have served up to 5 million customers by late 2016. Ivo Slanina, Country Manager of Home Credit Vietnam, spoke about the country’s attractive consumer finance market and the company’s performance.
The Home Credit brand has been present in the Vietnamese market since 2009. Its path to success was financing motorcycle purchases. What has changed since then?
|Economic growth in Vietnam, with a population of 90 million, is mainly driven by household consumption. Home Credit is helping to improve people’s standard of living against the backdrop of this trend. While in the past, our success largely relied on loans for motorcycles, today we are chiefly lending for consumer electronics, such as mobile phones, laptops and notebooks, and are also starting to lend for white goods, such as refrigerators and washing machines, and for TV sets.||
Ivo Slanina, Country Manager of Home Credit Vietnam
Motorcycles now account for approximately 10% of our business. Although quite a lot of them are still being sold, some three million per year, compared to motorcycles, the sale of mobile phones is some 20 million units per year.
People, in fact, want to buy electronics, in particular smart phones, on installments much more frequently than any other goods. Our estimate is that in Vietnam, up to 40% of the goods related to digital communications services on the Internet are sold with support provided by one of the consumer finance companies.
However, the real boom in hire purchase sales of electronics started in mid-2015 when we were the first in the market to offer loans without any mark-up. Zero interest rates kick-started the whole market.
How do you generate profit when customers have zero interest rates?
When you are able to double the volume of sales for manufacturers within a single year and to approach customers who earlier never thought of
shopping on credit, then companies such as Korea-based Samsung and China-based Oppo, or large retail chains, are willing to contribute to your distribution costs. And customers then really receive loans at a zero rate of interest.
Your company last year received the Most Innovative Consumer Finance Award from International Finance Magazine. Can you tell us about Home Credit’s new innovative product?
I’m proud to inform that Home Credit was the first consumer finance company in Vietnam to offer the e-signing of cash loans for existing customers, in October 2016. The new function allows our customers to sign cash loan contracts via Home Credit’s website or Mobile App. Only 1.5 hours after the contracts are signed online, customers can withdraw cash via post or receive money sent to their bank accounts.
We saw that our customers prefer signing contracts online. Up to 80% of customers, who are currently offered cash loan contracts, prefer e-signing. Therefore, the new function doesn’t only help to create more convenience for our customers but also meets their requirements.
We have also launched a mobile app for existing customers. The app can help them manage their loans effectively, as it will show the payment schedule and also send notifications about time and amount of customers’ next installments. It can also show the way to reach the nearest point where customers can make payment. Customers can also check their contract details anytime via the app.
How many customers do you have in Vietnam?
We serve a quarter of a million people every month. Nearly 5 million clients have already accepted a loan from us; there are approximately 1.7 million active clients, i.e. those who are repaying their loans even as we are having this conversation. Sixty to seventy percent of them have bought electronics on credit, one-tenth of them motorcycles, and the rest are cash loans. And as regards electronics and motorcycles, we are the clear consumer finance market leader because we were the first and the most successful in offering installments without any mark-up.
What is your opinion of the payment discipline in Vietnam?
The Vietnamese are very responsible debtors in general. Both in terms of their ability to calculate the amount of credit that they are able to repay without any problems (in fact, we are helping them with this in our financial competence courses) and in terms of keeping the due date of instalments. In addition, the proportion of our loans past due is also decreasing as we deploy ‘big data’ in our risk management. Big data means unstructured data on the behavior of samples of population of different sizes. This data, which comes from various sources, such as telephony operators, social networks and electricity suppliers, does not tell us anything about a particular individual, a particular name, but it is a relatively accurate indicator for modeling the probable behavior of our clients. By the way, this makes it possible for us to approve a loan in something like four minutes. For this, we need a host of talents in IT, statistics, risk management etc. Lending is increasingly about technologies and about those who are able to integrate them with financial services. In Vietnam, ‘the regulator’s tolerance’ of non-performing loans is set at 10% of the portfolio; we are at less than a half of this, which is a very decent result, even by international standards.
Why is Vietnam frequently mentioned as one of the most promising markets?
No question about it. Not only because of the size of the population. That country also has a very favorable demographic profile. A lot of children are born there, there is a predominance of young people, and they are eager to achieve success and ready to apply themselves to work. The purchasing power and the economy are developing well, the standard of living is gradually rising and the Vietnamese can afford to spend more and more on goods. In addition, they love modern technologies and so they hold mobile phones in their hands and laptops all the time. And as their purchasing power increases, a lot of new houses and flats are being built. This creates the potential for a further growth in demand; this growth is huge and, in my opinion, unlimited, at least for the time being. In order for us at Home Credit to keep this long-term rate of growth, we have to behave in a way that our customers will keep coming back to us. This is why we have, for example, a large team who do nothing other than listen to customers, find what customers think and what they are telling us by, say, their behaviour during repayment, where they go for inspiration for shopping, and also in what ways we annoy them. Moreover, with customers who experience a short-term loss of income but want to continue repaying their dues, we always try to find a solution so that they all gladly come back to us.
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