Exploring new frontiers
Mitsuji Konoshita, chairman and chief executive of Group Lease, is expanding the company’s base in regional rural areas.
Group Lease Plc, one of Thailand’s leading hire/purchase operators, says that it expects its regional business to go to a point that its home turf business would account for merely 5% of its total portfolio by the end of this decade.
“Over the next five years we are expecting our Thai portfolio to be about 5% with the rest of Asean accounting for the remaining,” Mitsuji Konoshita, chairman and CEO of Group Lease, said in a telephone interview from Zurich, Switzerland. Thailand, he said, would not see its US$200 million (7.2 billion baht) portfolio shrink but instead other parts of Asean businesses would see a tremendous growth.
GL, which was founded in Thailand and took the first step of moving out of the country by undertaking operations in Cambodia and has now expanded to Laos. “The next step is to move into Indonesia where there is huge potential for us,” he said, adding that about 70% of Asean’s 600 million people live in rural areas, which is GL’s key target market.
Cambodia, which accounts for $60 million in GL’s portfolio, has been growing at more than 80% each month and he anticipates that the business will account for about $700 million by 2020. Laos, where GL only recently started its operations, could hit as high as $400 million around the same time and Indonesia, where the firm has been looking for opportunities to enter, could account for as much as $1-2 billion.
“I see a lot of opportunities in Asean and although I love Thailand, I feel that the market is already saturated, but there is tremendous potential in other Asean markets which we are now targeting,” said Mr Konoshita, who was in Zurich to meet investors and participate in the 122km ultra-marathon in the Alps.
Asked if there were obstacles in entering these virgin markets, Konoshita said that the obstacles are far less than the opportunities and if one has caught the right market segment then they would be on track to achieving success.
The target market for GL, according to the 48-year old executive, is focus on the rural market in each of these countries. Competition, he says, is from financial institutions that usually tap big ticket businesses and not venture further than 50km from the main cities, which is a market he does not want to touch.
“We are focusing beyond these city centric companies where the customers are looking to improve their livelihoods rather than focusing on consumption,” he said, adding that the focus on improving rural incomes would help generate better business in the long-term.
GL, has been ramping up its Cambodian operations through various means, especially selling farming machinery such as Kubota along with motorcycles.
INNOVATION
Konoshita says that the only way to make inroads into virgin markets is via innovation and courage to take risks. His firm has been at the forefront of trying to innovate to do business and of late, has started tying up with mobile phone operators in order for the customers to be able to make payments for their dues.
Citing an example, Mr Konoshita said that in Cambodia where the rural population have no bank accounts, the way to access their credit worthiness is a complicated process that requires his firm’s officials to go to the village and physically access the asset values and get to know the people so that there is a “shame” factor in case of default. Once credit worthiness is accessed, loans are granted and payment methods are innovated through tie-ups with mobile operators.
“It doesn’t matter if you have a bank account or not, but everyone these days has mobile phones and this is what we did, using a scratch card to be able to make payments,” he said. The average ticket for payment is around $25-40 and those making payments could buy the amount in refill scratch cards for their mobile phones, punch in a certain number and the payment would then enter GL’s account.
He added that one does not need to have a smartphone to be able to do this and this is what has kept the non-performing loan in his Cambodian portfolio to 0.4% against the 7% NPL level seen in GL’s Thailand portfolio. The firm is also using other means to communicate with customers such as Facebook, WhatsApp or LINE to remind customers to pay and be diligent on their commitments.
“These things have helped us grow tremendously, in August our portfolio grew by 92% year-on-year and this comes on top of the 88% year-on-year growth that we saw during the second quarter of 2015,” he said. Figures during the third quarter are very good, although he would not reveal the numbers as details have not been released to the Stock Exchange of Thailand.
In terms of profitability, both Cambodia and Thailand account for about the same although in terms of revenue Thailand accounts for about 70% of the overall revenues. “I can assure you that for the next three to four years the growth in Cambodia is likely to be as strong as this,” he added.
He said that he would replicate the model in Laos and Indonesia, and hopes to see higher revenues from these two new markets.
Investors interested in tapping the Cambodian market can participate in a seminar entitled ‘Logistic: Cambodia’s New Growth Engine’, to be held in Phnom Penh on Thursday, organised by the Post Publishing Plc. For registration, call 02-616-4441.
I see a lot of opportunities in Asean and although I love Thailand, I feel that the market is already saturated, but there is tremendous potential in other Asean markets