Name
Global FinTech Guide
Country _ Name
Thailand
SectionTitle
Loan services / factoring / loan broking / finetrading
Body
FinTechs belonging to this category act as a loan creditor (even short and very short-term loans), are broking loans or receivables or conduct factoring of loans, which were given to private or business customers. In this business area you also find “peer-to-peer” (P2P) services, in which FinTechs enable a multitude of users to give loans (and brokered by the FinTech-platform) to other users or companies.

Finetrading is hereby a financial service of FinTechs, where they buy due receivables and grant the debtor an extension of payment time. 

As an ancillary service some FinTechs offer alternative credit assessment services to check the solvency of a borrower.

Introduction

Attitude of the country towards loan-giving-, factoring-, brokerage-, finetrading- and ancillary services

According to a BOT report from the fourth quarter of 2021, the demand for loans has increased while the standard for giving out loans remains the same for business customers. As for private customers, the demand for loans is progressively rising, and financial institutions are likewise progressively relaxing the standard for providing loans. This demand is a result of the pandemic, during which loans became an essential working capital for both private and business customers. 

Legal affairs  

Obligations and requirements to provide loan-giving-, factoring-, brokerage-, finetrading, and ancillary services described above

There are two (2) groups of service providers that require licenses: commercial banks licensed under the Financial Institutions Businesses Act B.E. 2551, as amended, and non-bank service providers licensed under the relevant notifications of the Ministry of Finance. No license fee is charged for any of the licenses. 

Non-bank service providers are required to seek licenses for three (3) types of loan businesses regulated by the BOT: 

a. Personal Loan under Supervision (P-Loan): 

A personal loan under supervision refers to personal loans without assets or properties as collateral, which include loans originated from hire-purchase and lease of goods that operators do not sell in the ordinary course of business, except for vehicles and machines, as well as “title loans”. Personal loans under supervision exclude loans for education, traveling to overseas employment, medical treatment, natural persons abroad, and employee benefits, as well as loans that have documents for land rights or documents for use of land rights, buildings, properties, or other assets as collateral.

For the purposes of supervision of personal loan business, a “title loan” refers to a loan for a person holding legal rights to a vehicle, whereby business operators receive vehicle registration records or arrange to have a contract or document for transferring the vehicle registration in advance as a debt guarantee. This includes arrangements to have a contract or document that allows operators to sell or take any other action with a debtors’ vehicle for debt repayment, while debtors may continue to keep and use the vehicle as normal owners.

Currently, the maximum total interest, fines, services fees, and charges for non-title loans is set at 25% per year (effective rate), while the maximum for title loans is 24% per year (effective rate).

The credit limit for loans is now calculated on the information-based lending approach, depending on the type of loans, as prescribed in the BOT Notification regarding Personal Loans under Supervision.

b. Retail Loan for Occupations under Supervision (Nano Finance): 

Nano Finance is for the purpose of business undertakings that have a maximum total credit line for each debtor of THB 100,000, (approx. USD 2,925) and credit terms as agreed
between debtors and operators. In this regard, operators must have a flexible credit-granting process according to the characteristics of the type of debtor (e.g. start-up businesses etc.). However, Nano Finance excludes loans originated from hire purchase, leasing, sale, and lease back of goods that operators sell during business, as usual as well as vehicles, machines, title loans, and travel loans for overseas employment.

The BOT has set the maximum allowable total interest, fines, service fees, and charges for the provision of the Nano Finance under the supervision at 33% per year (effective rate).

c. Provincial Retail Credit under Supervision (Pico Finance): 

The MOF regulates the provision of provincial retail credit, called “Pico Finance,” whereby a business operator who wishes to provide Pico Finance must obtain a business license for these operations. 

Pico Finance refers to the provision of loans, with or without assets or properties as collateral, to individual customers residing in the same province as the head office of the business operator. The requirements and qualifications of the business operator depend on the types of Pico Finance provided—for example, maximum loans of THB 100,000 (approx. USD 2,925) or maximum loans of THB 50,000 (approx. USD 1,462).

The maximum allowable interest rate for the loans varies depending on the credit limit of the loan and whether there is collateral. For example, in the case of a secured loan with a credit limit of up to THB 50,000 (approx. USD 1,462), the total interest, fines, service fees, and charges must not exceed 36% per year (effective rate).

Since 2019, the BOT has also regulated peer-to-peer (P2P) lending—a different finance business whereby the person wishing to operate the P2P lending platform must obtain a business license. In this regard, a P2P lending platform operator refers to a person who provides an electronic system or network for P2P lending, and a lender is a natural or juristic person who offers a loan through an electronic system or network (excluding crowdfunding providers).

So far, no business operators have obtained a license to operate a P2P lending platform in Thailand, according to the BOT website. Four peer-to-peer lending platform operators are currently testing their services in the BOT’s regulatory sandbox framework.

Additional comments regarding the legal situation for loan-giving-, factoring-, brokerage, finetrading-, and ancillary services or what FinTech’s must be aware of in this business area

The demand for loans has been steadily increasing for both individuals and businesses, which is a result of disruptions from COVID-19. The BOT is aiming to increase the efficiency in providing loans and lowering the criteria and interest to help business operators and individuals shore up their financial health.

Economic conditions

Market size for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services and biggest companies in this business area

According to BOT records, as of March 2022, there are 144 P-Loan providers, which includes both non-collateral and secured cars; 46 Nano Finance providers; and 337 Pico Finance providers in Thailand. The number of loan providers is increasing as the demand for loans is higher. Information regarding the companies relating to market shares is not available to the public.

Additional comments regarding the economic situation for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services or what FinTech’s must be aware of in this business area

As described above, the market for loan business operators in Thailand is large and competitive, and the demand for loans is anticipated to increase in 2022. Overall, the market for the loan business operato
rs in Thailand is positive.

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