Payday loans firm Ferratum is expecting rapid growth in Britain this year, and its chief executive said fears over unemployment and the sometimes punishing interest rates associated with the loans had not dented demand from customers.
We are expecting a huge increase in our numbers in Britain for this year. People want to take on a small loan, they don't want to go to the bank for a bigger loan, CEO Jorma Jokela told Reuters in a telephone interview.
Ferratum was launched in 2005 and is majority-owned by Jokela, who says the Finland-headquartered company is the biggest in its sector in Europe.
It benefited from the traditional Christmas shopping season to win several thousand new UK customers in December, who took on short-term loans to buy presents, with a fourfold increase in applications for its loans from November to December.
Across the group, customer numbers rose to 1.1 million in 2011 from 650,000 in 2010. Its long-term goals include reaching more than 10 million customers by 2014, with operations on all five continents along with its core European market.
Jokela said Ferratum remained a profitable business. He said it had a pretax profit figure that was a double-digit number.
The company launched in Britain in July 2011.
Jokela said it currently had less than 100,000 customers in Britain, adding Ferratum expected the number of people who have applied for payday loans in Britain to rise across the industry to 3.5 million in 2012 from 2 million in 2011.
POLITICAL CONCERNS OVER PAYDAY LOAN FIRMS
Payday loan firms, such as Ferratum, The Money Shop and Cash Converters, typically lend out a few hundred pounds to customers for a week or fortnight, tiding them over until they get their next pay cheque.
Such companies also compete with the likes of British subprime lender Provident Financial
The industry has benefited from the financial crisis as it has filled a growing gap left as mainstream banks refuse loans to low-income customers.
However, the sector has come under attack from politicians, who say it risks dragging ordinary people down into a debt spiral and needs tighter regulation.
If the loans are rolled over, debts can quickly escalate and some of the loans charge annual interest rates of more than 4,000 percent.
Ferratum's Jokela said the interest rates on his company's loans ranged from under 100 percent to up to 3,000 percent. Such firms charge rates far higher than at mainstream banks to cover the costs of quickly processing their handouts and since the loans are deemed riskier than conventional bank loans.
The maximum loan Ferratum offers in Britain is for up to 300 pounds ($470), while in Europe the figure stands at 1,000 euros (843 pounds).
Jokela rejected the charge that payday loan firms could trap people massive debt problems, saying the majority of its customers were employed and there was a low default rate.
The main problems for over-indebtedness come from bigger loans rather than the smaller loans, such as having too many credit card loans. It is all too easy to say that microloans are dangerous but we are not the main problem.
(Editing by Hans-Juergen Peters)