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WE DEPLOYED A RESERVE PARACHUTE IN CRISIS

Accurate risk-management, effective IT solutions, reasonable sufficiency of the distributor network building – all these factors are useful for lending institutions at ordinary times. And moreover, in crisis they serve as a basis for ensuring business survival.

We entered this market in advance of the crisis, in the mid-2008. Vigorous operating activity fell on the crisis start: late summer – early autumn. Despite this, as distinct from many market players, we haven’t stopped lending.

When building our company, we focused our efforts on two basic supports:
1) civilized financial intermediary;
2) integrated financial company, in fact, a quasi-banking lending institution with a license for lending.

KreditMarket entered a competitive market: we realized that for Ukraine it was close to a perfect competition status. Over 160 banks and more than 400 insurance companies were operating. Our business model focused on the highly mass segment – rendering of services to the medium and low income citizens. We deal with simple people.

Though our team is rather young, from the professional standpoint, it’s the age mate of the loan market. By way of example, Kyiv headquarters' staff is represented young people with the working experience gained at banks, they are open for reasonable risk and ready to perceive and assimilate all new things. They have a relevant career history at financial institutions and with projects. In terms of the sales network, first of all, again we mean young people with suitable education and ability to sell well.

In the crisis period we deployed our so-called “reserve parachute”. When entering a young competitive market where the partners may behave not very decently, along with the basic scenario, an alternative development option was prepared by our company. We have built an integrated financial company to ensure a closed lending cycle – with our own front and back offices, risk management, staff, etc. – to secure our company from indecent conduct of partners.

Initially, we established a basis with the centralized back office, good risk managements, and successful IT solutions. This basis is highly competitive with the average Ukrainian bank, and even sometimes leaves it behind. We did it voluntarily, though our team did not anticipate a crisis but got ready to other scenarios, and the company was insured against other risks.

In addition, we placed our stake on the effectiveness, i.e. the service rate and quality. We realized there would be a price competition which depends solely on the input resource price and risk management model. The better your risk management is, the less you can charge since fewer resources have to be established.

At the very beginning, before the crisis started, our key activity was financial intermediation: our company was a respectable partner for many Ukrainian and western banks. Our priority value was an effective distribution of partner products.

As the crisis started, our partners reduced the range of lending program. First of all, they cut off financial intermediaries to maintain their own banking networks. It was the time when we quickly stepped on our second support – an integrated financial company – and filled our distribution network with own lending products. Generally speaking, even today we are still selling our lending products, and do it very actively.

This balance centre shift to sales of our corporate lending products brought significant corrections to our plans. The company’s reaction to the crisis implies a principal rebuilding, from the financial intermediation strategy to the strategy meaning an integrated financial company. We completely reconsidered the network expanding plans: our company decreased investment in opening new subsidiaries and started using “easy” channels. The buildup was not through our subsidiaries, but due to partnership points: we combined subsidiaries with other banks, insurance companies, and entered distribution networks, etc. Today, we are placing our stake on partner points of sale, agents, call centers and Internet.

We have significantly changed approaches to risk management: in the thick of crisis we had to set our feet on large-scale industries, such as metallurgy. When plants were standing idle, it was unreasonable to accommodate people with loans since they were not able to pay back, otherwise it would cause troubles to us and customers. We were working carefully with separate companies and industries. Our company has introduced serious procedures of check through the credit reference bureau.

The crisis in the Ukrainian financial market led to differentiation. Our financial company started to work contrariwise as the lending product supplier. KreditMarket works with the national banks, as well as the western ones, based on the concept of Open Finances.

Due to the fact that our company did not stop its activity in crisis, today we have an adequate statistics for nonstandard portfolio estimated in per cents, but not in double figures as in the market on average. Today we are satisfied with the quality of our portfolio.

The ability to reform on the run, having used available capabilities, good teamwork, focused development strategy, correct positioning, quality branding, and decent conduct towards partners ensured not only a proper survival of KreditMarket in the crisis period, but also its successful development.

 
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