Our international markets
Central Europe
Our largest and most established markets are the four Central European markets - Poland, the Czech Republic, Hungary and Slovakia. They joined the European Union in May 2004 and boast rapidly growing, yet relatively undeveloped, consumer credit markets with further potential for growth. We now have over 1.6 million customers in this region.
Home credit didn't exist here before Provident moved in. For the first time, customers had a quick, convenient alternative to local banks or borrowing money from friends or family.
Many customers in Central Europe live in urban areas which lends itself well to our home credit operation. We've also benefited from the high calibre of available employees and a culture that values responsible borrowing and repayment.
Mexico
Mexico has the potential to be our largest market to date and with 307,000 customers already, it shows that Mexican customers value the products and personal service we provide. Mexico has a population of 109 million and the potential consumer credit market is growing as alternatives to borrowing from family and friends are introduced.
We have home credit operations in two regions - Puebla and Guadelajara. Our plan is to continue this expansion by rolling out our business into other areas of Mexico to create five regions - each with a population of around 20 million each.
Romania
We began our first Eastern European venture in April 2006 with a pilot home credit operation in Romania. The consumer credit market is growing and with a population of 22 million, we see potential for our simple, affordable financial products in this market. So far, we have 51,000 customers in Romania and having monitored the pilot operation closely decided to roll out the business nationally in 2007.
Russia
In December 2007, following a rigorous search and extensive due diligence, we acquired a small Russian bank for a consideration of £2.8 million in order to provide us with a licence to operate. We are now completing the regulatory filings and procedures that will allow us to commence lending in the Moscow region in the first half of this year. We intend to pilot both in Moscow and one further major Russian city for about 18 months to evaluate the market and build our local team. If this is successful, we will begin a wider geographic roll-out in mid-2010. The cost in 2007 of preparing for entry into the Russian market was £0.5 million (2006: £nil) and in the six months to June 2008 was £2.2 million as expected.
The business model will continue to revolve around weekly home collected credit using self-employed agents to make collections in customers' homes; however, we are introducing a new delivery mechanism in the form of a pre-loaded Visa debit card. The card will be given to approved customers with an agreed loan amount that can be withdrawn in cash through an ATM.