British credit company Provident Financial Slovakia (PFS), which has been providing short-term cash loans to Slovak customers since last March, officially opened its Bratislava branch on June 20, pledging to add a further 15 million pounds to its already one million pound investment in Slovakia.
The company is dipping its toes into the Slovak credit market hoping to raise client numbers from the present 800 to more than 1,300, with a relatively new service on the Slovak market - home credit.
Credit firms already exist in Slovakia providing similar sized loans to those on offer from PFS - from 5,000 up to 20,000 Slovak crowns ($100 to $500). But PFS is focusing on Slovaks the firm believes would be willing to take loans - even at higher interest rates than those on offer with banks - for the luxury of not having to leave their home to do business, and not having to specify the purpose of the loan.
"The loans are negotiated at a place most convenient for the customer, usually in his or her house," said Kenneth McPartland, a manager at PFS.
Market analysts, though, say that PFS could be facing competition from other short-term lenders, particularly leasing firms, whose numbers have mushroomed in recent years. Short-term cash loans are not new in Slovakia, but only a few companies, such as Telervis Plus (operating as Kešovka) and Profi Real have been running home credit services since the end of last year.
"People see instalment purchases to be most attractive," said Marek Jakoby, an analyst with economic think tank MESA 10. "However, when people are filling out lots of papers, standing in queues and having to state the purpose of a loan, they may opt for the relative comfort of home credit."
The attitude of many Slovak citizens does not provide a clear answer as to whether the new service will be embraced.
"I would have to see the loan's interest rate to decide whether I'd prefer comfort over the expense of using my own time [to arrange a loan]," said Pavol F., a 31-year old programmer. "But it also depends on the kind of situation I'm in. If I'm very busy and I need to take a loan, I might take a more expensive one knowing that someone will do everything for me. Not specifying the purpose of a loan could also be an advantage I'd go for."
More credit wanted
PFS's entry onto the market comes at a time when Slovaks are beginning to enjoy more credit options.
Since1997 lending institutions have switched to a more individual-oriented approach to credits. The number of bankruptcies has soared since the mid-90s and many banks, stung by poor lending decisions and an inability to recover assets at crashed firms, now see people as a much less risky proposition than companies.
Strict criteria at almost all Slovak banks for lending to companies has created a credit crunch in the corporate sector, but left banks with excess cash. Seeing lending as still a more attractive option than investing into state papers, banks have started to look more closely at providing a wider range and larger volume of credits for ordinary people.
The country's largest banks, Slovenská sporiteľňa (SLSP) and Všeobecná úverová banka (VÚB), both privatised in the last six months, have said this year that they are considering more lending to individual customers.
"There has been a [growing] trend among lending firms to focus largely on citizens rather than the business sector," Jakoby explained.
The shift in approaches in lending could see growing competition for PFS. However, the firm is relishing the challenge, says McPartland.
"We concentrate on what we do well and the competition can worry about us. We are happy to compete. Hopefully, by bringing our own high standards here, we will bring the whole industry up and the competition will have to meet our standards."
