Economic benefits

The economic benefits of consumer finance

Consumer or household spending is a key driver of economic growth and development; it often accounts for well over half of a country’s GDP. There is even greater potential in developing markets. A well-established, properly-regulated consumer finance market therefore has macroeconomic advantages that benefit a country’s overall economy by smoothing liquidity constraints and sustaining consumption, which in turn boosts output and creates jobs. It also brings microeconomic benefits by helping individuals with little or no credit history gain access to reliable and affordable credit for improving their standard of living and enables companies - such as retailers - grow their businesses.


The role of Home Credit in national economies and society

Consumer finance specialists and banks assume different roles in emerging and mature markets

Source: Home Credit Group Analysis


Consumer finance companies such as Home Credit complement traditional banks by serving unbanked consumers. These are typically people with lower-than-average income and higher risk profiles. The fact that these clients typically have had no interaction with regulated financial institutions does not mean they do not have financial needs. If these needs are not properly catered for, they are excluded from numerous opportunities to participate in their communities and prosper. This is a particularly pressing issue in emerging markets, and this is precisely where a consumer loan is often more appropriate and more accessible than a bank loan.

Home Credit enables these customers to gain their first experience with formal financial services by providing small, fairly priced and clearly explained loans. By design, our strategy incorporates financial literacy education along the way, leading to greater consumer confidence in credit institutions across both the financially included and unbanked segments of the population. At the same time, customers develop personal credit histories, which can be used by local credit registries to fine-tune loan offers from other participants, to provide greater insight into customer habits and needs and to design more targeted government policies.


Accessibility of loans

Consumer loans are more accessible for first-time borrowers

Source: Home Credit Group Analysis


Consumer finance not only helps to meet individual financial needs, it also promotes entrepreneurship, offering greater choice and opportunity to poor families. The result is greater social mobility and, over time, a levelling-out of some of the more endemic inequalities in income. Goods bought using consumer finance loans do not need to be only for personal consumption; as examples, in China, Home Credit has a special product for financing small vans for rural farmers, and in Vietnam the major part of Home Credit’s loan book is made up of loans for motorbikes. These products are often used by people to run their own businesses.

As for businesses that are already established, local and national retailers alike benefit from partnering with us: our financial services are tailored to their shops and their goods, providing a complex service which, in turn, attracts more customers, increases brand loyalty and facilitates sales of durable goods.

For countries that wish to rebalance their predominantly export- and investment-driven economies into a mixture that includes domestic consumption more prominently, Home Credit’s consumer finance loans provide a fast, easily-accessible private-sector boost to national efforts. As an added benefit, instilling a culture of loan repayment often leads to a higher household savings rate.

Sustainable relationships with retailers

Home Credit’s business model is based on providing loans for durable goods at the retailers’ stores. This is where we acquire most of our customers. Therefore, we strive to build mutually beneficial business partnerships with retailers with a long-term view. Access to easy, simple and fast lending services in stores, without the need to make several visits to a bank branch, gives our partnering retailers a strong differentiator in relation to their competitors.

We can significantly increase partnering retailers’ revenues (often by around 30% depending on the types of products sold) compared to those retailers who have not offered in-store lending. Our ability to increase our partners’ revenues comes from powerful back-office support which provides for quick scale-up, robust fraud prevention and short ‘time-to-yes. While people are shopping, within a maximum of 60 minutes, we can provide a response to their loan application. These and other features facilitate a relatively high approval rate while safeguarding affordability for the customer.

Our sales representatives in stores can efficiently support retailers in successfully converting prospects into executed purchases. We always strive to team up with our partnering retailers to ensure that our value proposition matches their business concept and maximises the benefits we bring to the store’s customers.

Helping retailers grow their business

We offer tangible long-term benefits for retailers such as growth in sales volumes and increased sales efficiency which bring them a competitive advantage for attracting new customers:

  • Attracting new customers: Retailers that offer in-store lending win an increased inflow of customers to the stores with a propensity to purchase more products or products of higher value. This generally leads to a perception of better service from the retailer.
  • Home Credit’s “easy, simple and fast” lending concept with identical monthly instalments up to loan maturity is an easy-to-understand lending option even for less-educated shoppers. This makes it a viable proposition for improving sales efficiency and sales conversion rates.
  • Our products are unified across the market, affordable and efficient, yet easy to implement. We make sure customers in the stores know that they are being properly looked after. This brings loyalty and repeat sales.
  • Long-term satisfaction surveys indicate that we generate repeat sales, with about 30+% customers applying for a second loan from us in Russia and Asia. We also enjoy high referral rates from satisfied customers to their friends and relatives.
  • Our unique underwriting approach coupled with a fast approval process, all supported by our advanced IT systems, ensures we provide for a very quick post-sale settlement. The retailers get the money for the goods sold before a customer pays the first instalment.

As we value our partnerships with retailers highly, we offer them comprehensive support:

  • All necessary technological equipment
  • Comprehensive training
  • Dedicated advisers
  • Expertise sharing
  • Extended marketing support
  • Quick settlement for the goods sold

Once a partnership is brokered, we monitor the points-of-sale rigorously and regularly through a combination of performance statistics, on-site visits and mystery shopping to ensure that our goals and agreed standards are successfully met.

If you are a retailer and interested in partnering with us, please contact the Home Credit sales department in your country.