Home Credit: Thinking differently about financial literacy
Home Credit: Thinking differently about financial literacy
Home Credit has been conducting financial literacy education programmes for more than two decades – an uncommon and pioneering practice in the consumer finance industry. The company also measures the impacts of financial education programmes on its customers, which sets it apart from other industry players.
Jan Ruzicka, Home Credit’s chief external affairs officer, used to travel to Vietnam every month to share the group’s know-how, experience, and case studies. Social distancing and the pandemic caused a pause in his travelling schedule, but he has now returned to Vietnam.
Ruzicka has brought with him Dr. Sumit Agarwal, Professor of Finance, Economics, and Real Estate at the National University of Singapore, to develop new ways to implement financial literacy in Vietnam.
Digitalisation – a risky gift
“Financial literacy projects are our signature all around the world and we have been conducting them for more than 20 years. Things were offline when we began and we had to print textbooks and send volunteers to rural areas to educate children and farmers who were not familiar with financial services,” Ruzicka recalled.
Digitalisation marks a change in financial services with things moving online.
“Digitalisation is a gift, but it also makes those who are not financially savvy vulnerable to fraudsters,” said Ruzicka.
A quick Google search reveals many cases of phishing aimed at victims with little financial knowledge.
“We believe that it is important to give credit to mass market customers, but at the same time, we need to educate them so that they will not fall into online traps. It is our task to protect customers and to provide them with know-how and credible, safe services,” Ruzicka stated.
Financial literacy – a means for customer protection
At first, Home Credit’s perspective on financial literacy puzzled Agarwal.
“As an economist, I was puzzled when I first learnt that Home Credit – a private consumer finance company – wanted to educate its consumers. Most finance companies think about how to maximise returns rather than educating consumers. But after working with them, I realised that they really wanted to educate,” Agarwal said.
Agarwal has a passion for protecting consumers and has found a common cause with Home Credit, leading to his decision to partner with the company in developing content to educate a wide array of consumers.
“I believe in household sustainability in which each household should be sustainable from an environmental, social, and financial point of view. We cannot achieve environmental sustainability unless we have financial sustainability. Access to credit is key to both household financial sustainability and a country's economic sustainability,” Dr. Agarwal emphasised.
Financial inclusion for the unserved
Vietnam’s financial banking situation is very similar to other Asian countries such as China, the Philippines, Indonesia, and India. Traditional banks have a tendency to serve citizens in big cities and neglect those in the countryside. However, digitalisation and fintech banking have brought financial services to the masses, including those in mountainous and rural areas.
According to Agarwal, surveys suggest that around 70 per cent of Vietnamese citizens are financially illiterate.
“Financial literacy should be coupled with digital literacy when most consumers are dealing with finance digitally. There is a lot of fraud and manipulation by third parties who realise that many financially illiterate people are trying to access finance digitally, and they are most likely to get it wrong,” commented Agarwal.
This is also where the story of Home Credit’s financial literacy starts.
“We focus on farmers, women, vulnerable people, and children to help them understand the basic ideas of money, finance, and responsibility. We deliver information to our customers both online and offline because some people are still not confident with digital communications,” said Ruzicka.
Every year, Home Credit’s financial literacy courses reach more than 100 million people. In Vietnam, about half of the company’s marketing budget is spent on financial literacy. Home Credit Vietnam welcomes 300,000 new customers onboard each month, yet its non-performing loans always remain under 3 per cent, and in some circumstances even under 2 per cent.
Brand health checks indicate that customers’ level of satisfaction with the company’s products stands at 65-75 per cent – a relatively high score compared to the overall industry. These figures are evidence that Home Credit Vietnam’s financial literacy efforts have paid off.
A responsible grandma
In the world of fintech banking, with new and young brands always launching, Home Credit is seen as a grandma with more than two decades of experience. Ruzicka used to get laughed at for his grandma-style conservativeness when talking to business leaders in China, the Philippines, and elsewhere. This conservative attitude meant that the company survived the economic crisis when others did not.
“With regard to financial literacy, environmental, social, and governance, and business, we are long-term players and long-term believers. We do not believe that shortcuts work,” emphasised Ruzicka.
In Vietnam, Home Credit’s financial literacy includes measuring the effectiveness of its activities.
“We carry out a survey with customers on their journey, seeing how the customer responds to financial literacy and offering more suitable options based on their feedback,” said Ruzicka.
“I do not know of any other financial companies around the world that actually measure their financial literacy programmes, how customers are benefiting, and how social welfare is improving,” commented Agarwal.
“This job is done not by corporations but by governments. But even governments do not track it sufficiently,” he added.
Home Credit entered the Vietnamese market in 2008 – one of the first companies specialising in consumer finance to do so. The company has always pursued the goal of sustainable development. It has been working with the State Bank of Vietnam, the Vietnam Women’s Union, and the Ministry of Finance to expand its financial literacy programme in Vietnam – a critical market for Home Credit.
