Opening up financial services to the unbanked
Home Credit prides itself on being a responsible lender and an active participant in the communities in which it operates. We want to become the lender of choice for previously underserved groups of the population who need access to trustworthy and regulated sources of financing.
Traditional lenders often do not adequately cater to the needs of those on lower incomes or first-time borrowers. The need for a developed credit history and collateralisation are common barriers for individuals who would benefit from using formal financial services. In emerging markets in particular, these requirements leave many potential customers unable to take out loans, and in some cases drives them towards unregulated lenders. This exclusion can have a detrimental effect on their financial and personal well-being, and hinders economic and social development.
In contrast, our business includes these communities from the outset. Our pre-contractual lending offer and the written loan contract are designed to give an understandable, transparent and easy-to-understand description of the cost and obligations of a loan, thereby giving potential customers all the information they need to make qualified decisions about borrowing. This ensures that our customers are financially included in the society.
Financial inclusion through safe and affordable loans
To help ensure customers make the right borrowing decisions based on their own circumstances, we have introduced a cooling-off period as standard across all our operations: up to two weeks after signing a loan contract with us, the customer can reconsider his or her decision and withdraw from the contract without penalty. This industry-leading proposition forms a core part of our customer charter – a series of commitments we make to ensure that first-time borrowers and repeat customers alike feel safe and confident using our products.
Our loans themselves are also part of our approach for broadening financial inclusion. Home Credit’s loans are within customers’ means not only because of their fair price, but mainly because of the affordable instalment plans. In addition, we ensure that a loan is safe on both sides of the lending relationship: on our side, by carrying out state-of-the-art credit scoring calculations, and on our customers’ side by always helping them to make a simple and clear assessment of their own disposable income and credit capacity, including a generous buffer to cover unexpected life events. Both we and our customers can thus be secure in the knowledge that a loan will not burden them unduly. Once this relationship of mutual trust is established, our communities feel more comfortable using formal, regulated financial services – a positive result for all.