It is not easy in the Philippines for the subsidiary of Home Credit, a consumer finance lender. Seventy percent of the country’s population of 110 million do not have any bank account. In spite of that, the firm is performing well. “By mid-2017, we want to cover the entire Philippines,” says ANNICA WITSCHARD, the Swedish CEO of the Czech company Home Credit in the Philippines.
You have worked in various European countries and in the U.S. throughout your career. When you arrived in the Philippines, was it a cultural shock for you?
It is still a developing country, which is probably the biggest difference from the many countries to which my work brought me earlier. In addition, Asia is completely different than Europe in terms of the structure of society, the infrastructure and the pace of life. But I was probably the most surprised by the way the Filipinos are positively disposed all the time. You realize how we from the “privileged” part of the world are always complaining about something. They are simply happier, although they face more problems. They take things as they are and don’t complain. It suddenly gives you a different perspective on the life around us.
When I read news from the Philippines it’s usually about the rough anti-drug war waged by President Duterte and it usually causes fear. Is there such an atmosphere there?
I have only been in the Philippines since April. The elections took place in June so I don’t have a long-term comparison. I follow local and global news stories and see a certain difference between the views. Foreign media focus more on controversial issues, whereas these are not so visible in the local press. The view there of human rights is certainly different from Europe in many respects. The Philippines is going through a process of change and I am not here to say what is right and what is not. People there want change, just as virtually everywhere in the world…
Isn’t this atmosphere causing fear about doing business?
In general, if the political stability were to become jeopardized, then it could happen. But I think that the President and his administration are intent on the country’s infrastructural and economic development, which is a good direction for business. When I discuss this with people from Philippine firms they have a more positive view of the future than previously.
It is true that Home Credit is performing very well in the Philippines; over the first nine months of 2016 the volume of small loans increased five-fold. How have you achieved this?
It’s incredible growth, isn’t it? We have been operating in the Philippines for three years and are gradually expanding from the area around the capital, Manila, to the whole country, which is spread over 7,000 islands. This expansion itself is driving up the volume of loans. Our cooperation with large firms such as manufacturers of household appliances and mobile phones, Korea-based Samsung and China-based Oppo, which are extremely popular in the Philippines, is also helping us. And what is positive for us is the growth of the country itself; its economy is estimated to surge by seven percent year-on-year again, which is almost unthinkable in, say, Europe.
And what full year results are you expecting?
We have yet to see. Christmas is a huge holiday in the Philippines and most of the December commerce takes place between the 15th and 23rd days of the month. Compared with the last but one year, for example November was somewhat weaker. Not only for us; retailers in general had a similar view. But December looks very promising. Compared to Home Credit subsidiaries in other countries we are a “new player” in which investment continues to be made, which is normal when a business is starting. We partly have to use our own technology to compensate for the local weaknesses – for example, the infrastructure in the Philippines is not very good and the internet is rather slow and expensive. We are also creating new jobs; we started off with only a few people and now have more than 4,200 employees. We are expanding in all directions and very fast.
Your predecessor planned that you would have a million customers in the Philippines by the end of 2017. Are you still reckoning on this?
I think the figure will definitely be higher. As early as before December, we achieved half a million customers, which we had originally estimated for as late as the end of the year. I’d bet that the figure at the end of this year will exceed a million, to some 1.3 to 1.5 million clients. It depends on how fast we decide to expand the business, but we would like to be virtually all over the Philippines by the middle of this year.
In Europe, loan companies such as Home Credit have in fact been helped a bit by the economic crisis, because banks were reluctant to lend. Is there anything similar in the Philippines?
In Asia generally the trend is a bit different. Many people there don’t have bank accounts at all, and in the Philippines this is the case of seven people out of ten. Banks there are also even more conservative than in Europe and focus only on the most affluent clients. There are 11 times more Filipinos than Czechs, 110 million, and the average age is only slightly above 23. They are often employed for the first or second time, largely by foreign companies. And this mass of people doesn’t have much of a chance to obtain banking services. This is also opening the door for us.
And how do you work with such clients when they don’t have bank accounts?
For them, the biggest magnet is smartphones that make it possible for them to use services that are missing because of the insufficient physical infrastructure. And then, and in particular, the Filipinos love selfies and social networks. They are apparently the largest users of Facebook in relation to the size of the population. So, they look for ways how to obtain smartphones and pay for them. They don’t have credit cards – bank card penetration generally in the Philippines is five percent. But this doesn’t mean that five percent of the whole population have a card; to be able to apply for a card, banks usually want you to already have one. So, a person may have three or four cards. This heavily dilutes card penetration throughout the population. We try to approach everybody, in the first place the growing middle class, whether or not they have a card or account.
So then they repay their loans to you in cash at branches or retailers? How does it work in practical terms?
They can pay in shopping galleries or in stores, but not directly at our locations. There are also collection points to which people go to pay their bills or to collect the money that Filipinos working abroad are remitting to their families. Such points operate in much the same way as, for instance, Western Union in Europe.
It must be complicated in such a system to check their ability to repay, is it not?
This is an interesting issue, which is still relatively new for me. When in Sweden, where I’m from, if I type my social security number in the internet I can find almost everything about myself: my address, the names of my parents, my credit history, etc. This does not exist in Asia. You frequently don’t even have a uniform ID card. The Philippines is an example of this. Verifying clients’ identities and their ability to repay is a sophisticated, technologically advanced process that Home Credit has developed in various Asian countries, and we in the Philippines pick the parts that best suit the local conditions. It starts with the completion of loan applications. People must bring along two, sometimes three different documents that prove their identity. We also use various resources referred to as “big data” – from telephone operators, energy suppliers or from social networks, which are helping us model people’s behavior. We have also been the first Home Credit foreign subsidiary to start using biometric data, fingerprints.
A number of people here would regard this as an excessive interference with privacy. Do people there have a different perception?
Biometric data use is quite common in the Philippines. They give fingerprints willingly there, and not only for identity checks during elections. People there provide equally willingly, say, data from social networks, which can be used for verifying their identity and whereabouts. Although social networks are popular, most shopping does not take place online but rather offline. The popularity of gigantic shopping galleries is interesting and quite unique for the Philippines. At least two of them are among the world’s top five. Whole families go there for air-conditioned, clean and modern environments that they may not have at home. Most shopping takes place there.
What do they buy most frequently thanks to you?
Mobile phones and portable electronics come first. Computers are also popular, of course, in particular for those who work on their own. Another group of people buy appliances such as air conditioners, or refrigerators and TV sets.
Do they actually know in the Philippines that Home Credit is a Czech firm?
I think not; they take us as an international or global company. But for them, it would perhaps be a problem to differentiate between, say, the Czech Republic and Sweden; we are too far from the Philippines for this, and it is understandable. They have asked me twice whether I am Italian. From Sweden, they know, for example H&M stores, which they have there, and the IKEA brand, although it doesn’t have a store there. This has surprised me.
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Annica Witschard – Studied at a high school in her homeland, Sweden, and in Australia. At the University of Linköping she took International Business studies. Annica spent most of her professional career in the banking division of the GE Group, where she worked her way up to the position of the Executive Director at GE Capital Nordics. She has headed the Philippine subsidiary of Home Credit since April 2016. She has moved to the country together with her family. She enjoys jogging.
