More and more popular payday loans | Business
Lasco Financial Services Limited says its payday loan portfolio has quadrupled in the past eight months, surprising the company, whose target was more modest 30% growth over the medium term.
Loans, popular because of liberal qualification criteria, but also among the most expensive debts to acquire, are most often sought by micro-entrepreneurs.
Lasco Financial chief executive Jacinth Hall-Tracey said her market target was professionals who were offered rates of 52 to 78 percent. The risk of default is managed by ensuring reimbursement by payroll deduction.
Lasco Financial’s earnings portfolio is roughly J $ 20 million, says Hall-Tracey, who estimates the total market to be around J $ 500 million.
Access Financial Services is considered the market leader.
But Lasco Financial, which estimates its payroll business to be about a quarter of Access Financial’s, says it is determined to close the gap with new products launched aggressively to the office and other workers.
The company has implemented a “market rate” car loan and will soon add an education loan product.
But Hall-Tracey, even as his business capitalizes on the upturn in demand for accessible loans, warns that the payday line of credit, which is a service to targeted clients in their workplace, may become a habit, and as such, should be used in moderation.
“They are very accessible and can actually help people in an emergency. However, they are very addictive and can create an environment of high consumption,” she said.
“From a business perspective, they require smart credit practices because they are unsecured loans.”
In the last quarter of 2010, Lasco Financial developed a more aggressive sales strategy for the payday loan plan, which involves the deployment of sales staff to serve subscribers in their workplace.
Eligibility criteria include full-time employment and the ability to repay through payroll deduction a loan of 1% per week or 52% per year.
Borrowers with lower credit scores who need collateral pay 1.5% per week, or 78% per year.
The repayment period is nine months and Lasco has set the debt service limit for eligible applicants at 30 percent of take-home pay.
“We have indeed quadrupled our numbers since November, increasing our portfolio by 200%,” Hall-Tracy said.
“Our strategy for rolling out our payday loans to the public is specific targeting. We recognize that we are in a very competitive environment, and while we want to increase our numbers aggressively, this is our preference.”