How one digital lender is helping small businesses in Thailand avoid loan sharks

June, a 35-year-old from southern Thailand, was working in the purchasing department of a large hotel when COVID-19 hit and she lost her job. After struggling to find alternative work, she began cooking and selling curry, based on her mother’s secret recipe, in her local market to support herself.

But ingredients cost money. And with raw material shortages and supply chain issues, June found it hard to bridge the gap between expenses and revenue. This problem, faced by countless small businesses throughout Thailand, led June to FINNIX.

According to the National Statistical Office of Thailand, about 36 million citizens, or half the country’s population, have limited access to financial services, such as loans or credit cards.

This is due to a number of factors, including a lack of proper financial documentation, or having an income below the threshold required to borrow money set by traditional banks and financial institutions.

Three-quarters of this group is self-employed, often running small businesses and dealing with highly variable incomes. Many end up turning to illegal loan sharks that are unregistered with the state to cover their business and living expenses—often at interest rates of 10 or even 100 times higher than the bank's.

It’s a situation that fintech company MONIX is aiming to address with its FINNIX application, which provides micro loans in five minutes. The app allows any Thai citizen with a valid ID and a standard bank account to apply for a small loan at a fair and low interest rate from their smartphone.

To date, the company has helped over half a million underserved people—primarily blue-collar workers, street vendors, freelancers and gig economy specialists—with more than 15 billion Thai baht (S$600 million) in loans across seven million installs.

Still, it's one thing to qualify for a loan, and another to understand the terms and conditions, and how those payments fit into a monthly expense sheet. That’s why FINNIX is also designed to help educate its users in financial literacy.

The app provides easy-to-understand content that explains how a loan actually works. This allows customers to feel more comfortable borrowing money when they need to, and to return the next time they need help to either pay an expense or grow their business.

Thiranun Arunwattanakul, chief operating officer of MONIX, estimates that out of every 100 applicants, the company can approve about 25%. That's a relatively high rate of acceptance considering that none of the applicants meet the lending requirements of traditional banks, and that the loans are unsecured, requiring no guarantors or collateral.

Agility thanks to a digital-only model

One of the key reasons FINNIX is able to offer so many small loans so quickly is that it operates as a digital-only lender through the power of artificial intelligence and machine learning, with no human interference, physical branches, or locations. All customer activity takes place online.

“They can do this anytime, anywhere, and don't have to wait for someone to underwrite the loan for them,” said Thiranun. “They can access the money any time they want.”

The company deploys a number of advanced analytical tools, powered by AWS, to personalize loans and repayment plans to match individual customers’ needs. It evaluates metrics, including a customer's ability to pay, by analyzing a host of data points pulled from multiple data streams such as phone information and utility bills.

A vision to add value to life

Considering Thailand's many small stalls, restaurants, shops, and carts, which—as in so many other places around the world—form the base of the country's retail economy, Thiranun believes the app has great potential to grow.

The plan, she says, is to develop FINNIX into an end-to-end financial platform, building on its lending services to help small business owners run or expand their businesses, or get financial liquidity. “We’re here to help and create opportunities for people to prosper and enjoy life. That's our vision, our main objective.”

Beyond entrepreneurs or business owners, the app is also for anyone who might need help paying off sudden and unexpected expenses, or seizing opportunities to gain additional income and survive during times of high uncertainty. Said Thiranun: “This kind of financial support from FINNIX could actually create opportunities and save someone’s life.”

For June, the curry entrepreneur, FINNIX has enabled her to broaden her offering from her mother's curry to a full menu of dishes. She has also been able to invest in new cooking pans, utensils, and other equipment, and says the platform's main benefits are its trustworthiness, and that it has minimal requirements.

With the tourism industry in Thailand recovering, June is debating whether to look for work in the hotel industry again. Either way, she's pleased she can make that decision with the safety net of her cooking business, supported by FINNIX.