Provident Financial Extending Home Credit in Eastern Europe

Provident Finance is the most well known door step lender in the UK, having provided non standard loans to excluded customers with no credit history for 125 years. In 1997 Provident established a new division known as ‘International Personal Finance’ and has been busy developing markets in former Eastern bloc countries, as well as Mexico.

Home credit is a new concept to these countries but has serviced those on low incomes in the UK for many years, extending home loans to individuals who have no other means of borrowing, and setting fixed repayment amounts on loans which are available for up to one year. Typically the charges on home credit are extremely high with an APR of 545% applied to a 23 week loan, which is the shortest term available in the UK.

Repayments are made weekly to a door to door collecting agent who works on a commission basis, and in theory builds up a personal rapport with the borrower so is in a good position to know if the borrower can afford to take out additional loans. There are no late payment charges or default fees on the loans which is one explanation given for the very high APR’s. Instead of the loan carrying administrative or processing fees, the fees are all included in the quoted APR, ensuring the borrower knows upfront how much the loan will cost them both in total and in weekly repayments.

‘International Personal Finance’ is now using similar methods to extend home credit to Poland, the Czech Republic, Romania, Hungary, and Slovakia. They establish agents in highly urbanized populations which don’t have general access to credit or to the banking system, and prefer to deal with cash.

Borrowers do not need to provide any security to obtain a loan which will be in local currency cash. Cash will typically be delivered to the customer in their own home by predominantly female agents, as a high percentage of customers are also women, allowing a good rapport to be established between the borrower and the collecting agent.

Loans range from £50 to over £1000, with terms extending from 6 months to 2 years. Different APR’s apply across countries. The company is keen to establish itself as a fair, friendly and responsible lender, and as a leading example to others who enter the home credit market. Their policy is to not pressure borrowers to take on unrealistic amounts of borrowing which they may struggle to repay. It will be interesting to observe how far their home credit system eventually extends across Eastern Europe.