The main difference between the Romanian market and the other EU countries is the former's orientation toward long-term lending, believes Stephen Rice, general manager with UK's Provident Financial firm specialised in home credit.
"We are focusing on high values on the short term, whereas domestic financial institutions grant long-term large loans. This has been one of the interesting aspects about the Romanian market since we haven't seen this happen in any of the countries we operate in. I believe this is due to the norms set by the National Bank of Romania," says Rice.
He believes this long-term orientation of domestic banking institutions is not beneficial since "the longer the term, the more frequently people forget what they bought".
Having entered the domestic market early last year in the wake of investments worth 2.4 million pounds (3.5 million euros), Provident Financial is the only domestic financial institution specialising in home credit.
"Before entering the market, we'd conducted surveys about Romania that showed us the average wage was 80% of that of Poland and we drew up our budgets depending on this. When we got here, we realised everything was more expensive than in Poland because there are many wealthy people, but also many poor people," explains Rice.
Despite this gap, the British are satisfied with their results on the domestic market, both owing to the higher-than-expected values of granted loans and to the high level of paybacks.
Provident last year posted revenues worth 300,000 pounds (440,000 euros) and won 6,000 customers domestically, in the context where it started operating in April 2006.
Launched as a pilot-operation meant to test Romania's potential, Provident Financial may change its status this year also after expanding outside Bucharest, to Brasov, Galati, Braila, Ploiesti, Pitesti, Giurgiu, Targoviste, Buzau and Urziceni.
The British institution offers home credit ranging between 400 RON and 1,000 RON over a period of up to 39 weeks, with existing customers having the possibility of requesting loans of up to 2,000 RON over a period of no more than 52 weeks.
Targeting medium-income persons, Provident is aware that this category may have trouble in paying instalments in due time and this is why they do not levy any delay penalties, but ask for a fixed rate at the moment the loan is granted, which can cover up such possible incidents.
"Many institutions are promoting much lower costs, but if you take the to analyse all the fees, you realise they have much bigger costs," adds Rice.
Still in the phase of business expansion in Romania, the British expect to step into the black as late as during their fifth year of activity on the domestic market.
Provident Financial
Entered the domestic market last year, in the wake of investments worth 2.4m pounds (3.5m euros)
Is the only financial institution domestically specialised in home credit
Offers home credits ranging between 400 RON and 1,000 RON on a 39-week period; existing clients can ask for loans of up to 2,000 RON over a 52-week period
Last year generated revenues worth 300,000 pounds (440,000 euros) and won 6,000 customers
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