Consumer Lending in Thailand - New Market Report

Consumer lending rises in 2015

Consumer lending witnessed a stronger current value growth rate for both gross lending and outstanding balance in 2015. While Thailand’s political situation stabilised in 2015, macroeconomic conditions including GDP remained weak. The government increased its public spending on tourism; however, these efforts did little to help. Local consumers’ spending was still weak, as their confidence was negatively affected by the soft macroeconomic environment in Thailand. Furthermore, they were already dealing with high household debts accumulated towards the end of the review period.

High household debts limit consumer lending

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2014 saw the household debt to GDP ratio reach 86%, a percentage almost triple that of 10 years earlier. Consumers committed the bulk of their income to repay their debts during 2015, with many struggling to finance their loans efficiently and effectively. Financial institutions including commercial banks feared an increase in non-performing loans, especially amidst the lacklustre economic conditions. The Bank of Thailand cautioned against stimulating consumer lending just for a macroeconomic boost, and focused on improving financial responsibility among consumers. As such, financial institutions adopted strict and cautious consumer lending standards in 2015 to ensure the household debt service ratio remained optimal.

Implementation of the Debt Collection Act

During 2015, the National Legislative Assembly passed the Debt Collection Act, which officially took effect from 2 September 2015. Debt collection in Thailand was renowned for its abusive and unscrupulous practices, which saw the government stepping in to stop all of these. The new law aimed to provide a fair set of rules and regulations for debt collection and is applicable for all debt collectors, be they institutional or individual. Debtors can also be better protected for their rights in the process. Infringement of this law will constitute a criminal offence for the debt collector, which will be subject to a fine of up to Bt500,000 or imprisonment of up to five years.

Card lending accounts for the strongest performance

Card lending recorded the strongest current value growth rate, in both gross lending and outstanding balance terms, within consumer lending in 2015. The majority of consumers already having access to credit cards made card lending the easiest form of lending for them. Also, banks were offering attractive promotional rates as well as instalment plans for bulk purchases, therefore stimulating consumers’ willingness to use cards for payment at the end of the review period. As a result, in 2015 card lending outstanding balance posted almost double the current value growth that it recorded in 2014.

Consumer lending is set for a positive performance

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