We started 23 years ago in Phitsanulok as a leasing company working closely with the motorcycle dealers and providing financing to their customers. Over time we expanded our business to motorcycles for cash as we saw demand from our customer base that required additional cash after they had finished their loan payments and expanded MTLS throughout the Northern and Central regions of Thailand.
MTLS provides both secured and unsecured loans to our customers in Thailand. Today we have 900 branches throughout the country and have four products, motorcycle title loans, car and agricultural vehicle loans, land title loans and nano-finance. We have a very simple philosophy within the company that we want to provide the best service to our customers whether it be a simple act of serving them a glass of water when they walk into our branches or charging the lowest interest and commission in the country for our products. By doing this we have been able to grow our customer base very strongly to having a THB 10 billion portfolio of which 70% of our customers are motorcycles, 20% vehicles and the remaining are land title deeds and nano-finance. Our customers are farmers, construction works, salary men or women, small business owners and civil servants.
Our biggest issue was always been funding our growth, before we became a public company we had to utilise long term loans and company equity as our funding base for growth and were still able to grow 20% p.a. with an average interest cost of 6.5%. Becoming a public company has provided us with new expansion options that were not previously available. Firstly, we can expand throughout the rest of Thailand specifically Bangkok and Southern Thailand where combined we only have 10 branches. Secondly our cost of financing has decreased through a combination of short term and long term loans from 6.5% to 4.5% and we expect it to be below 4% in the near future. Thirdly, our debt to equity ratio is only at 0.88x and we are allowed to increase it to 4x thus financing our growth is not an immediate concern anymore.
The economic slowdown has resulted an increased need for cash by our customers which has helped to grow our business, however we must be able to collect payments and this is where MTLS thrives as we have the lowest NPL ratio in the industry at 1.1%. This is lower than financial institutions which are at 2.5%, credit card companies at 3%, leasing companies at 5-7% and so forth and we are able to do this because of our own internal system and a strong culture towards ensuring that the teams within the company work together and with the customer to ensure that the loans are repaid.
In 1997 we experienced the “Tom Yum Goong” crisis, but because we are providing Thai baht and receiving Thai baht we were not affected, in 2008 there was the “Hamburger” crisis, but because we do not deal with foreign firms we were not affected. What affects us are events such as the floods in 2011 or the drought this year, and during those periods certain customers within certain regions of the country were affected but because MTLS is spread throughout Thailand with multiple products we were able to manage these periods of crises and still continue to grow.
The AEC offers new opportunities both for us and competitors. In terms of competition we are not concerned as by next year we will have 1,350 branches throughout Thailand and for a new entrant to enter with one or two or three branches, it will be very difficult for them to compete. Also we do not plan on expanding yet throughout the region as our focus is Thailand for now, however we do hope that with the AEC and improved regulations for migrant workers in Thailand that our customer base may expand from purely Thai nationals to all nationalities within the country.
Over the next three years our business plan is very clear, we will expand an additional 450 branches this coming year and 500 branches in the next with the aim of growing 50% per annum. We do not have any plans at the moment to expand throughout CLMV but perhaps it may be the case in the future, we may expand our product offerings to our existing customer base as well. But we can only achieve these results if our team continues to work hard, and with our corporate culture of honesty, hard work and team work we are confident that our discipline will ensure that we are able to achieve these targets and still ensure that our customers are serviced well.