Medical emergencies and unexpected expenses are two of the most common reasons why people seek loans from their employer or a third-party financial institution.
Doing so presents certain challenges for employer and employee alike. Challenges which Oliver Sabga and his eldest brother, Conrad J Sabga, began observing in their businesses a few years ago, which in turn inspired them to establish the completely web-based financial technology company, Term Finance Holdings Ltd (Term Finance), in late 2014.
Oliver Sabga, co-founder and CEO of Term Finance, spoke about these challenges and the solutions identified by his company during an interview with Business Day.
"We had a lot of employees who were borrowing from the company, internal loans, and we had a lot of employees who were going to third-party credit institutions. On the internal lending side, we found that employee loans were tying up cash flow and working capital and more importantly, creating a sense of moral hazard. For instance, how does management decide which employees to lend to and when internal loans are granted, do you keep that person employed, if they're under-performing, until the loan is paid off? It creates an awkward scenario that management would like to avoid.
"On the third-party side, we found a lot of credit institutions were enticing or encouraging employees to borrow a lot more than they needed. When we looked into the process, to understand what our employees were going through, we found there was often a complete lack of transparency in addition to a level of irresponsibility in the credit process and loan approvals. Most importantly, we found that our employees were not being treated in the most dignified way. We comply with anti-money laundering and know your customer requirements."
Sabga said in seeking a solution, he and Conrad "spotted an opportunity" to enter the market, providing a transparent and much more convenient way for people to obtain a loan.
"We chose to focus on people who have good jobs and who have shown commitment and loyalty to their employers because we wanted to provide a lending service that is fit for purpose, transparent, responsible and efficient."
Seated in the boardroom of Term Finance's new back-office space on the premises of CIBC FirstCaribbean bank's Maraval branch – 74 Long Circular Road, Maraval – Sabga explained how the loan application process works.
"Term Finance offers a complete end-to-end web-based solution to our customers. So from the point at which an employee or a consumer has a need for credit, they go on our website, www.termfinance.com, and all the way through to the end, when we disburse funds to their account, it's all done digitally. We engage with customers via various forms of social media and messaging applications."
Unlike other third-party financial institutions, Term Finance markets its services to companies, not the public.
"There's a reason for that," Sabga told Business Day. "We are not into enticing people into borrowing. We are very much here as a solution to a credit problem that may arise. That's why we go through HR channels – we are an ethical, responsible, lender that's focused on employee well-being. So we talk to HR departments about the solutions we can provide whenever their employees need access to credit. We're not about promoting borrowing or pushing loans in an aggressive way."
Term Finance entered the market with what Sabga referred to as their "core product", a Responsible Short-Term Loan, which enables an employee to borrow up to one month’s net salary. This loan is re-paid over two to five equal monthly payments.
"We also recently launched a new product called Term Finance Loyale, which is designed for really loyal employees who have shown commitment and loyalty to their employers for more than five years. This product enables a customer to borrow up to three times their net monthly salary and can be repaid over 12 to 24 months. This product is offered at a favourable interest rate and is offered by invite only."
In the three-plus years since its establishment, Term Finance has expanded outside of TT, "providing responsible credit" to people in Jamaica, Guyana and Barbados.
The company is in talks with the regulatory body in St Lucia and hopes to open Term Finance (St Lucia) Ltd later this year while in the medium term, it intends to open an office in Costa Rica.
Having spent the first few months of its existence designing its own lending algorithms, Term Finance issued its first loan in April 2015. Then, in May 2016 it started lending to customers in Barbados followed, in October 2017, with loans to Guyana customers and most recently, in November 2017, to customers in Jamaica.
"We put the customer's application through our algorithm and it gives us a lend decision. Because we have a very pointed market approach, more than 95 per cent of customers who go on our website leave with a loan. If you have been employed by an organisation for more than 12 months, Term Finance will do everything in our power to ensure that you can get access to our service," Sabga assured.
Business Day also spoke with Term Finance's loan operations manager Erin Affonso and manager, HR and administration at Chief Brand Products, Naiema Mohammed.
Asked if it's more difficult to process a loan outside of TT, Affonso said that's not so "because through our systems and technology, the process remains the same. The only difference is that you're speaking to someone with a slightly different accent, but that makes it fun."
Affonso also said they use the WhatsApp desktop application to ensure customers outside of TT experience the same level of service as their local counterparts.
"This is a great tool (because) it allows us to engage with our customers on a more personal level and gives the process a more friendly feel."
Speaking from the HR perspective, Mohammed said partnering with Term Finance has greatly benefitted Chief Brands Products.
"We reduced bank time-off, job letters and our carbon-imprint, as everything is online. The Term Finance team provides untouchable service...Within as little as 24 hours, we have had workers who have benefited from loans credited to their accounts, especially in emergency situations for them, at low interest. We would recommend their services to any employer, especially if they want to reduce administrative cost and improve employee benefits," Mohammed told Business Day.