Why ProCredit doesn’t have focus on consumer loans

Consumer loan is an amount of money lent to an individual for personal, household and family purposes, for purchasing non-investment goods or services (usually cars, travel, appliances, healt services etc.). They are multipurpose and flexible to use, they are also quickly available. No collateral is needed, and documentation is minimal. Consumer loans have their significance and can be of many help to individuals. But as we have seen in many examples they can be misused. One of their characteristics are high interest rates.

Some banks in the world and in Serbia are putting them in focus, attracting clients. They usually have commercials offering this type of product. The marketing of these banks can sometimes be characterized as very aggressive, provoking certain questions. Sometimes the image that is being created in their commercials is false, it does not contain data that influence transparency, and can depict real financial liabilities. Good examples would be lack of real interest rate. Lots of the banks become part of microloan community, but in essence money they give with such loans are actually not invested but spent.

On the other hand, banks like ProCredit oriented themselves on different type of products. They don’t even promote consumer loans, so it is impossible to see commercials for them on any TV station. Anyway it is necessary to have it between other products and services. There are no other institutions in Serbia that could satisfied the need for consumer loans, accept banks. So they are in some way “forced” on selling them. It is important to make a difference between different purposes on which the money from consumption loan would be spent. Beside this, some banks put the quality of their clients in second plan. If we look at loans to private clients, ProCredit is offering housing loans, loans for reconstruction and renovation, and their emphasize is on this part of offer.

ProCredit is development-oriented bank. They are working with small and medium companies as businesses can create new jobs. Also, they are promoting culture of savings. Private savings can provide you a protection in difficult situations. It is also good to have in mind that no matter how the money from savings will be used eventually, up to that moment the funds can be invested by the bank. As explained on the bank’s site, shareholders prefer sustainable long-term profit over short-term maximization. Having in mind this, promotion of consumer loans just doesn’t fit the big picture. The bank is turned towards clients who would invest or save money. Since it has been established up to now, ProCredit kept conservative attitude toward loans to clients. The banks is warning about problems that huge competition in area of consumption loans could create lot of damage to financial sector. Those are some points in which ProCredit bank differs itself from previously mentioned banks.

So is the case with other banks, that put in front themself missions and goals in spirit of saving culture, social responsibility.

Dusan Bojovic