OREANDA-NEWS. June 27, 2008. Peruse BelGazeta's article to learn why a successful business-oriented bank has set out to conquer retail banking market and what lending products it offers to retail customers.

Consumer loans for a businessperson

Consumer lending in Belarus has just entered the stage of active development and has bright prospects ahead. With this in mind, many banks began to diversify their consumer lending products. Belgazprombank is not an exception – despite its established reputation as a business-focused bank.

Sergey Dobrolet, deputy chairman of the Belgazprombank Management Board, told a BelGazeta reporter, Olga Miksha, why the successful bank set out to master the retail loan market.

- Belgazprombank is a leader in SME servicing. Why does it want to develop retail services that are effort and money consuming?

- It is people who do small and medium business, and these people also need banking services. As a bank combining retail and wholesale activities, we are aiming to provide a full suite of services to our customers. When a company representative comes to the bank to effect transactions on behalf of a company, he or she should be provided with an opportunity to use all personal banking services including payment of utility bills, personal deposits, loans and others.
Another reason to develop retail products is the need to diversify the business. Worldwide, businesses see upturns and downturns while individuals are traditionally considered more reliable customers from the solvency viewpoint. Under the bank development strategy, retail banking constitutes 30% of our business.

- There are several basic types of personal loans including auto loans, home loans and consumer loans. Will Belgazprombank focus on certain types of lending?

- Under the legislation, loans are classified into short-term and long-term, and long-term personal loans can be issued for buying a home or funding consumer needs. Further, consumer loans are divided into those specifying the purpose of borrowing (like car or education loans) and not specifying any particular purposes. Due to objective reasons, consumer lending developed more rapidly then other types of loans. Four years ago, Belgazprombank commenced retail banking by launching car loans. A car is a good object for funding and a liquid collateral. The bank's credit risks related to car loans are much lower than those associated with other types of loans. Therefore, we started our retail loan services from providing car loans.
As we gained personal lending experience, mechanisms of servicing persons were becoming clearer and the bank's business processes were improving, we expanded the range of lending products for individuals.
From early 2008, our bank offers home loans that can be used either for buying or for building a home. Managing default risks is still difficult, and risk continues to be a restrictive factor for mortgage development. Our bank offers a wide range of auto loan options and credit cards lending; loans can be in cash or cashless.
According to statistics, car sales grow every year with the majority of buyers borrowing money to purchase autos. Thus, the share of auto loans in the bank's loan portfolio remains big.
Population now tends to raise funds through bank loans more actively. People came to understand that borrowed funds increase their buying capacity and enable them to enjoy more boons without long saving.
Consumer lending is developing very fast, and we have increasingly more customers who want to borrow some 5 million BYR for buying consumer goods.
Our Speed Money credit card solution is a very convenient way to borrow funds of up to 10 million BYR.
Speed Money loan can be arranged at our bank or at Belpochta post offices. Owing to our close cooperation with Belpochta, the Speed Money service has an extensive nationwide footprint.

- I hear the loan issue procedure can take a whole month…

- As a rule, Speed Money loan approval procedure takes three days after a customer submits his or her documents. The loan is available for use after 14 days after document submission. Sadly, there were cases when we didn't meet these deadlines, but that was rather an exception to the rule.
We constantly improve the loan approval procedure and do our best to provide services to our clients as quickly as possible. Will you argue that an option of raising a loan close to your residence without even applying to the bank is very convenient?
Yet, Speed Money is a pre-planned loan solution that does not suit for making spot purchases.
For making purchases on the spot, Belgazprombank has another lending option – Delay. With Delay, individuals can quickly make a hire purchase or receive a consumer loan within just 15 to 20 minutes at retail shops that have relevant agreements with Belgazprombank.

- Consumer loans are more exposed to risks than auto and home loans. How do you manage default risks?

- For each banking product, risks are included in the interest rate. On the other hand, before issuing a loan we analyse every borrower's creditworthiness. There are special credit scoring techniques to assess customer creditworthiness that are used in the most risk-exposed segments, this is especially the case with loans that are arranged at retail shops. Some applicants can be rejected.

- In case of hire purchases, loans are usually collateralised with fines and the purchased item. Can you remember any cases when you dealt with defaulters? What actions do you undertake in the event of customers' failure to pay back the loan?

- Of course there are cases when customers fail to fulfil their obligations. As a rule, such failures do not result from gross misconduct, but are rather caused by life circumstances like salary delays, borrowers' temporary departures or diseases. Normally, such people make late payments only once and then resume the normal payment schedule. Sadly, there are defaulting borrowers and even malefactors.
I'd like to stress that no bank is protected from default risks. In each particular case of failure to repay the loan we take measures so that the defaulter pays back his or her debt. First, we clear out the reasons for late payments and if the excuses are good, we work out a repayment plan together with the debtor. Legal proceedings apply to malefactors. Both items bought on credit and property owned by the debtor can be used to recover the loan.
Also, defaulting borrowers are not allowed to travel abroad. Should a corpus delicti be revealed in a borrower's actions, suits will be brought against him or her, and the case will be considered by law enforcement agencies.

- Do banks use credit bureau services for checking customer creditworthiness?

- They do, but at this stage such bureaus cannot provide answers to all questions important for banks. Presently, credit bureaus gather information on loans worth more than \\$10,000, therefore these data are more useful for assessing solvency of customers who borrow large sums. Information collected by such bureaus will be more useful when it embraces data on all loan applicants regardless of the amount they borrowed, on co-signers and payment failures.
Intensiveness of interrelations with a credit bureau depends on information completeness and urgency as well as on the price of this service.

- In what way will Belgazprombank compete with banks that position themselves as retail banks?

- Competition is toughening indeed, and the number of retail loan market players has markedly grown over the last year.
We understand that customers opt for banks where polite and knowledgeable employees give competent consultations and provide high-quality services. We strive to live up to our customers' expectations.
We are aiming to offer interesting, convenient, technology-intensive and affordable products to address our customers' various needs. Our bank never ceases to improve our lending procedures: we simplify loan arrangement process, minimize paperwork and loan approval time and, importantly for customers, reduce loan costs. Additional discounts are available for regular customers.
All this contributes to our strengths as a customer-friendly bank.