To make an informed investment choice, it is crucial for co-owners of Ngern Tid Lor (“TIDLOR”) to know who we are and, more importantly, how we think. As this is our first annual letter to co-owners as a publicly listed company, we would like to take this opportunity to introduce ourselves.
Despite its status as a middle-income country, Thailand remains one of the most unequal countries in the world in terms of wealth distribution. Because of this, many Thais remain underbanked; while most people have access to savings accounts, far fewer have historically had access to cash loans from banks and licensed nonbanks. Experts estimate that it takes around two decades, if nothing goes wrong, for a family to escape poverty; a journey that most underserved Thai families have had to make without much support from the private sector, that is, until TIDLOR came along. On the surface, TIDLOR hardly appears different from traditional title loan lenders that are now common across Thailand, featuring down-to-earth, localized shop house look and feel. Our branches are designed to be approachable and easygoing; this is in contrast to the more prestigious premises of banks that can seem intimidating to the ordinary Thai. Thus, the number of branches serving title loan borrowers far outpaced the number of bank branches.
Our company’s journey began by providing loans with a commitment to provide assistance to those who have traditionally been denied credit by formal financial institutions. Our product offering has since expanded to include affordable insurance. Our purpose could not have been articulated as clearly as it is today, but as time went on, we realized what sets us apart from traditional lenders is our approach that has always been anchored in the responsible lending principles of fairness and transparency. We have always made tough decisions in an effort to strike a balance between helping the underserved avoid the trappings of informal moneylenders and generating a healthy return to our co-owners.
Beyond our profit motive, we are a company staffed by employees and leaders who care about financial inclusion. We believe everyone should have an opportunity at financial betterment. That desire extends to how our leaders view our relationship with our employees. If we put the well-being of our employees first, they will be able to focus on taking care of customers and building a strong company. The true long-term winners of this philosophy are our shareholders and society.
What many people don’t realize is that TIDLOR is a company of “Firsts.” A lot of what is expected nowadays was rare or nonexistent in the early days of TIDLOR. Many of the standards people expect from a title loan player were originated by us. We have been breaking barriers and surpassing so many milestones as a company that it will probably be impossible to compile a complete list. There are, however, a few important achievements that come to mind.
- We were the first company in the title loan space to have a nationwide branch network. We led by example and set basic standards, such as providing customers with copies of their loan agreements and payment receipts.
- Our first TV commercial was the first-ever TV ad to feature motorcycle title loans, launched in 2010. This ad helped raise awareness and popularize title loans as a viable alternative to borrowing from informal sources.
- We were the first player to submit borrower repayment data to the National Credit Bureau. This has helped hundreds of thousands of individuals establish a formal credit history for the first time.
- Over a decade ago, we launched our financial education program, the first of its kind by a private sector lender. Today financial education is a common buzzword among regulators and financial institutions.
- We are the first company to receive the Nano Finance license from the Bank of Thailand.
- TIDLOR was the first financial institution to establish LINE Official Accounts for each of our branches to enable localized digital social marketing.
- TIDLOR is a founding member of the Vehicle Title Loan Association of Thailand (VTLA) in 2018, which played a key role in working with government regulators to legitimize title loans and establishing a license for the product.
- We were the first lender to spotlight the dangers of over-borrowing through an eyebrow-raising campaign in 2019.
- We made insurance affordable for the underinsured by pioneering 0% Buy Now, Pay Later for auto insurance. This has become an industry standard benefiting all vehicle owners.
It takes curiosity, guts, solid judgment, and a bit of luck to be First at something and become successful. Our direction as a company has always been to approach old problems with fresh eyes and break the mold especially when it comes to finding solutions and promoting financial inclusion.
A famous person once said, “If you want to be original, be ready to be copied.”
Nearly every good idea we introduced, whether it was a marketing campaign, message, billboard design, or product that we’ve introduced has been adopted by competitors. They’ve either tried, or are still trying to mimic our success. As we lead the non-banking space, larger players in the banking sector have taken notice of our accomplishments and have announced plans to invade the title loan market as well. We consider their interest in what we do to be a major compliment. Since our goal is to help the marginalized receive better education and access to financial products, we welcome their entry into the space. Having followers is validation that we’ve been doing something right, and competition keeps us on our toes.
We would be remiss if we told you that everything we thought was a good idea has panned out. When we are curious about a new idea, we think and tinker, finding ways to test them out quickly and cheaply. At any given time, we will offer multiple lending programs with underwriting criteria modified from our core policy. We do this to actively challenge and disrupt ourselves. This “always-on” testing approach drives our product innovation pipeline and helped us transition from a purely asset-based lender to one that lends via a hybrid model. We use data to develop credit and behavior scores that augment human decisions and can toggle between approval methods to optimize our lending.
Every now and then, one of the seemingly brilliant ideas will be too far removed from our core operations to test inexpensively. These initiatives require larger commitments. If we think the idea makes sense, we’ll move forward with it. In the past, we invested and failed on a number of initiatives, including but not limited to, wet market lending, new tractor financing, and our very first insurance campaign. For all of these projects, we made the painful decision to pull the plug on them, after making substantial investments and incurring losses. We are still unwinding some of these programs today. Beyond product testing, we also pilot different methods of organizational management. We have tried and failed at Holacracy, but succeeded in transitioning from a traditional waterfall-style IT development approach to a more dynamic method with squads and the scrum methodology.
What’s vital beyond success or failure is that we bothered to try. We’ve benefited massively by taking the insights from these missteps to make TIDLOR stronger for the long-term. Critical components of the infrastructure and strategy that we currently use to drive TIDLOR such as our Lead Management System, our Collections policy, and our entire Insurance Business, were conceived from the remnants of our past failures.
Because we can’t always anticipate which ideas will work, we will keep dreaming up new ones and continue to try. This will lead to more mistakes and bad ideas. We realize that we won’t be right all of the time; our aim is to be right most of the time. Resting on the laurels of our past successes would be foolish and a disservice to our co-owners. Our thinking here relates to long-term sustainability. As stewards of the company if we commit to trial and error, we increase our chances of stumbling upon initiatives that will sustain our growth, with the ultimate goal being that Ngern Tid Lor will fulfil its potential and outlive us all.
Our past achievements and continued future success have been and will continue to be fueled by our unique culture. We have passionately built our tribe around a tangible set of core values that are conducive to create an environment of trust and innovation. At TIDLOR we treat our values differently than most organizations; our Core Values are much more than just nice words written on a piece of paper, plastered on a wall, or printed on a poster; they express who we are both professionally and personally. As NTLers we consciously craft polices, recruit people, build platforms, and design processes that reflect the values we share as individuals because we recognize that the environment in which we work is important to employee engagement and happiness. It’s also easier said than done and potentially very rewarding; doing it successfully narrows the standard deviation in decision-making and minimizes miscommunication and friction between functions. This becomes more and more important the larger we get.
We are confident that our abilities to strengthen relationships with our clients, seek new partnerships, grow our organization, and stay innovative will be sustained as long as we can remain committed to our shared beliefs. I highly encourage you to visit our website or continue on with this annual report to read the full version of our values. During the post COVID-19 era, you can also participate in our TIDLOR Culture Camp, which we developed to help other companies improve employee engagement and enhance their corporate culture.
How we did in 2021
I am extremely proud of our accomplishments in 2021. TIDLOR had another year full of milestones, firsts, and new beginnings. Following a turbulent 2020, in which COVID-19 played a key role. We had assumed that vaccines would be rolled out in the first half of the year, and that tourism would begin to recover in the second half. Our assumptions turned out to be incorrect.
Nevertheless, we stayed committed to the well-being of our employees and customers while continuing to invest and build the future. We also raised nearly 7,000 million Baht of capital in a successful IPO that strengthened our balance sheet and positioned us for future growth. What makes me particularly proud of our IPO as milestone beyond delivering on our commitment to shareholders, is that the IPO gave our employees the chance to become a co-owner. For years, I have witnessed the commitment and sacrifices that countless NTLers have made to help our company become a leading non-bank in Thailand, all the while relating to me how much TIDLOR means to them. I received so many messages from employees expressing their pride and continued commitment to TIDLOR.
Our IPO led to more Firsts. Ours was the largest IPO in the financial services industry in the history of the SET. We also broke records with regards to foreign investor demand and employee participation. We were the first private-sector company to give retail investors the opportunity to participate via the small lot first platform. Beyond inclusive finance, our IPO also had the added benefit of reducing brand confusion, which remains a legacy issue for our company, but one that continues to diminish with each passing year. Lastly on the funding side, we became the first non-bank in Thailand to receive a loan from (International Finance Corporation: IFC). There are a few downsides of becoming a public company that we recognize and are learning how to manage. For starters, there is substantially more demand for our time from analysts, fund managers, and prospective investors. We are still trying to balance these requests for updates and previews against our existing priorities of actually running the company. The second drawback is the depth of information we are being asked to disclose, e.g., information about our performance drivers, business outlook, and future initiatives. We are a market leader with many followers. If we comply to these demands, our lead-time advantage when we launch innovations will become shorter, to the detriment of our shareholders. Co-owners, analysts, and prospective investors should expect us to be less vocal than our listed peers, and that we will make public disclosures when they are required, but not before. Our goal is to maintain our edge as long as possible.
On the product side, we rolled out the innovative TIDLOR Card product that transforms title loans from term loans into a card-based revolving credit facility. TIDLOR Card holders can now enjoy product features that previously were only available to those eligible for credit cards and unsecured personal loans. Through this product, rural, low-income, and self-employed borrowers now have increased flexibility and control in managing their cashflows, reduced reliance on loan sharks who typically charge ten (often twenty!) times our interest rate, and they are assured of the availability of emergency credit. Unexpectedly, cardholders have expressed a sense of pride, self-respect, and prestige. One client went so far as to tell us that they never thought that they would ever qualify for a card in his lifetime. This is a wonderful example of innovative and inclusive finance.
Despite our volume and insurance numbers being below our internal targets, I think we’ve done quite well to adapt and execute in the face of regulators imposing more restrictions on lending businesses and an economy that took a turn for the worse due to COVID-19 related lockdowns.
One area in which we continue to develop despite being impacted by external events, is IT. Over the past decade we have continuously experimented and invested in upgrading our technical capabilities while seeking new ways to deploy technology to improve our customers’ lives. Our current approach is to bring structure to chaos and reduce complexity for our branch staff. During this process, we continue to train and undergo a companywide digital transformation. Employees within non-IT functions are able to maintain chatbots and write simple RPA (robotic processing automation) programs. In the future, when the customers are ready to immerse in a purely digital experience, the additional investments required should be minimal. As part of our journey, we have also amassed quite a bit of technical debt and have identified the need to allocate time and resources to untangle our systems. While this won’t translate into any externally visible benefits, over time we should expect to see increased scalability, stability, and security, automation, and flexibility.
We started our journey of redesigning our systems architecture toward the end of 2020, and continue to learn and make good progress toward accelerating our flywheel. Digital transformation is not easy - if it were, larger organizations wouldn’t see the need to spin-off separate tech units to try to escape legacy issues. On this front, we elect to take the harder path and transform from within. This is because we view IT as a core capability, and fluent command of technology is an imperative for companies that aspire to innovate, differentiate, and lead in an industry of traditional bricks-and-mortar players. Frankly, it baffles us that with technology moving so quickly and with so many use-cases on how technology can be applied to benefit people’s lives, the industry still hasn’t invested more on IT. And while it’s not a competition to invest, the knowledge and experience gained as an organization is cumulative. Good luck to those who are trying to catch up with us - we feel like we’ve only just begun.
Looking toward 2022
I am the first to admit that it is impossible to predict the future. There’s no crystal ball. When I joined TIDLOR as its Chief Marketing Officer back in 2008, I never expected our runway would be this long. And despite the progress we’ve made, thirteen years later, the Thai financial services landscape remains fragmented with a patchwork of regulations that looks even more daunting now than before. Official household debt figures exclude what every expert estimates to be a large informal market. That said, with this industry backdrop in mind, however, we expect continued growth in 2022.
We are entering 2022 with continued caution on how our company may be influenced by external factors. We believe uncertainty will remain high. There is no guarantee that COVID-19 is behind us, and we should be mindful of its influence on the economy and regulatory decisions, especially given that the healthcare system has trended toward increased controls, limitations, and scrutiny for consumer protection. In essence, this could go either way. Getting COVID-19 under control would boost economic activity and tourism. Alternatively, there could be a repeat of 2021 if the situation takes a turn for the worse and lockdowns return. In case that happens, I believe we have set aside sufficient provisions, and that our loan portfolio remains healthy. Our shareholders need not worry about our balance sheet integrity.
We will continue to focus on the elements in our control and build flexibility into our business. We believe there is room to expand our presence in all existing products and through both digital and traditional channels. In today’s world, despite continued growth in digital culture, the customer journey is seldom mono-channel, and typically O2O. We remain convinced that investments in innovation and digitalization puts us on the right track to remain the leader in financial inclusion. We have a pipeline of products and services we are incubating and hope to release on a regular basis.
Lastly, if the opportunity arises, we will seek to invest and position TIDLOR as a strategic partner that offers risk management, technology, operations, and branch network management expertise in addition to capital.
Beyond the near-term
If we look beyond the near-term, I am optimistic about our prospects. Very few players within this industry or even those in adjacent lines of business possess the assets that we have at TIDLOR. It took years to build our unique mix of brand strength, omni-channel distribution, fluency in technology, risk-management capabilities, operational scale, quality institutional shareholder base, and employee base comprised of thousands of loyal and committed individuals whose values are aligned. Title Loans and Insurance Brokerage are two businesses that we revived and reinvented. While we have established leadership position in both verticals, these are still relative early days for us in applying technology to capitalize on our insights into the underserved. You can be confident that we are working hard to continue to improve our customers’ experience. We are also working diligently to identify a third leg of our business that will contribute to greater scale and choice for our clients while reducing their financial vulnerability. Over time, we hope that we will be able to deliver quality returns to co-owners with an appropriate degree of transparency and consistency alongside sustainable impact. We hope that our co-owners will read our values, reflect, and feel proud to own a piece of TIDLOR.
Finally, on behalf of NTLers, thank you for placing your trust in us and getting to know us. Nice to meet you and welcome to the family.