Ngern Tid Lor: Trailblazing Thai financial inclusion

Ngern Tid Lor, the microfinance and nano-finance arm of Thailand’s  Bank of Ayudhya snapped up the prize for Best Initiative in Financial Inclusion at RBI’s 9th annual Asia Trailblazer Awards in March. As Douglas Blakey explains, it was a relatively easy decision for the judges in what was a keenly fought category

Ngern Tid Lor is on a mission to reduce financial vulnerability for under-banked Thais and to keep the poor from the clutches of loan sharks. A core part of the firm’s challenge is to make insurance affordable for all Thais.


So Ngern Tid Lor (NTL) rolled out a first-in-market insurance brokerage service which makes auto insurance affordable to under-banked Thais, by successfully launching a unique solution of a first-in-market installment plan and insurance marketplace platform, leveraging its trusted brand and the influence of social networks.


The new offering has successfully overcome the barriers of unaffordability, lack of trust and inconvenience in purchasing auto insurance. 


The success has been reflected immediately in the surge in sales volume and overwhelmingly positive customer feedback online and offline.  


By combining its deep understanding of the market and its strengths in risk management, platform development, partnership management, distribution and branding NTL built a solution unique in the market, which consists of four key components:


  • An installment plan with 0% Interest to provide affordability: a first in the Thai market. While buying insurance by installments is not new, existing payment plans require credit cards.  As NTL’s under-banked customers tend not to hold a credit card, NTL does not require credit cards for its installment plan, offering up to six months at 0% interest
  • Insurance Marketplace integrated with Insurers for best coverage and price (also a first in the sector)
  • Face-to-face sales through nationwide branch network for trust and convenience - the biggest non-life branch network in Thailand, and
  • Leveraging its leading brand in the age of social media to encourage adoption: the most trusted brand in title loans by under-banked Thais.

Despite outward signs of prosperity, a burgeoning middle class and one of the lowest rates of unemployment in the world at less than 1%, Thailand is still ranked the world’s third most unequal nation after Russia and India, with a constantly widening gap between rich and poor.


In 2014, 8 million households or one third of the total Thai households (22 million households) had insufficient income to cover their living costs and were forced to take out informal loans to cover payments for which they were unable to save, such as medical costs, funerals and school fees. 


While the daily minimum wage has increased over the past three years, debt remains a problem for most households, with a 2016 study by the University of the Thai Chamber of Commerce (UTCC) revealing that informal loans represented more than 60% of debts of low-income workers earning less than 15,000 Baht.


Borrowing from registered financial institutions is impossible for those with unpredictable and unstable incomes and little or no collateral, forcing them to turn to loan sharks.


Low financial literacy leaves borrowers unable to assess their own debt repayment capacity, a situation exacerbated by the high and constantly rising interest rates imposed by the loan sharks. 


A lack of financial discipline puts further stress on the level of precariousness with those who can least afford to spend on consumer goods doing precisely that. The borrowers ultimately fall into a trap of debt rollover, taking out more loans to pay off other more urgent debts.

Raising Standards to Serve the Under-banked Thais

It is this vicious cycle that NTL has set out to break. 


When Bank of Ayudhya (Krungsri) bought Ngern Tid Lor from the troubled global insurer AIG in 2009, it wanted the company to serve the under-banked segment of the Thai population with accessible, fair, transparent & responsible financing rather than just making profits.


Ngern Tid Lor began by looking more closely at borrowers and quickly discovered that those trapped in the informal lending cycle were using their smaller, lower interest motor vehicle loans to pay off the loan sharks.


The company set about turning its vehicle-based lending business into a purposeful micro-lending one to serve the under-banked Thais, essentially providing an escape from the loan-shark trap. To reach higher numbers of customers, the number of branches was expanded and the time cut for its auto loan service from two hours to 30 minutes.


“We believe that helping customers and making a profit go hand in hand. Our example sets higher standards for other players.” Piyasak Ukritnukun, Managing Director of Ngern Tid Lor, tells RBI.


Ngern Tid Lor currently has 618 branches across Thailand and serves over 300,000 customers. Most of them are self-employed without steady incomes and so are unable to get financing from banks.


“Our customers are typically people on low incomes – perhaps with a bad or no credit history – who need a quick and simple means to borrow money but have difficulty obtaining credit through more traditional sources.” 


While the average loan size has come down over the past few years, the client base has increased. The company’s NPL ratio is also surprisingly low, less than 2%.


“When people don’t have credit, they work hard to preserve it. Most people are well intentioned and are willing to pay back their loans, and they are treated with dignity and respect and so are more likely to refer others.”


“The next step for our customers is to become bank customers. We provide the gateway for that,” says Piyasak. 


“In our business we used to say we produce loans; now we say we deliver opportunities.”

Moving Towards a Brighter Future

To promote financial opportunities that are fair and transparent and in line with the highest standard of practice, Ngern Tid Lor has invested heavily in brand building over the past year, adopting the tagline “Life rolls on” to symbolise its market leader status as an auto loan provider and non-life insurance broker. 


The logo has been redesigned to show revolving bank notes resembling wheels to convey a smooth flow forward and emphasise NTL’s aim to improve financial inclusion in Thailand through fair and transparent financing. Corporate advertisements underline this message by pointing to Ngern Tid Lor as a way out for those facing financial burdens.


NTL aims to maintain its market share while expanding access to its services by opening 200 new branches in 2018, bringing the total of 800 by the end of the year. 


“We believe that access to fair, transparent, and responsible financial services is everyone’s right. We are a company that cares. Our role in the grand scheme of things is to create opportunities for our employees, our customers, our partners, and others in society to have a chance at sustainable success and I believe that we have been successful.  


“And in the long run, it supports the sustainable development of Thailand’s economy.” concludes Piyasak.