Estonia warms up to credit

  • 2000-03-02
  • By Jaclyn M. Sindrich
TALLINN – In 1994, Siim Kallas, then president of Eesti Pank, was the first person in Estonia to be honored a credit card.

Six years later, 20,474 more cards – mainly Visas – are floating around the country.

Accordingly, the increase in credit card expenditure has been large and swift: up 25 percent from 1997, to 5.18 billion kroons – but those numbers do not include leases, according to Uhispank data.

Clearly, Estonians are feeling more confident about spending, and it is no longer that only the very wealthy have the plastic to charge a new vacuum cleaner or cubic zirconia necklace. About one in three now can do the same.

Jaanus Leemets, head of Uhispank's loan development department, said that improved legislation and changes in lending procedures are reasons why credit has garnered such popularity.

"Today we can say that the quality of lending and risk-handling is very close to the leading commerical banks in the world. . .the ratings given to Estonian banks is improving all the time," he said, adding that majority holdings in Hansapank and Uhispank by large Scandinavian banks is proof of the quality of Estonian banks.

Affordable loans are also now more commonplace, he explained.

Leemets believes, however, that Estonia is headed quickly toward a situation similar to that of the United States, where credit is as common as animal fur on the coats of women in the streets of Tallinn. The danger lies in the ostensibly innocuous, brightly colored plastic cards, that people may use until bills spiral out of control and collection agencies call at all hours of the night to demand repayment.

Leemets explained that the jump in credit and loans began during 1996 and 1997, when the economy and stock exchange were growing faster than ever. But at the end of 1997, the Asian, Brazilian and Russian economic crises took their toll, and people were much more conservative when taking on credit liablities. Several banks went bankrupt, including the Eesti Kommertspank and Eesti Maapank, as faith in the financial sector continued to dwindle.

But a successful recovery, according to Leemets, caused Estonians to bounce back to a more positive attitude about credit.

Still, he said, people "would rather postpone using credit if they don't feel their life is on a strong track. . .but it's not anything 'bad' or shameful to have a loan or lease from a company."

Estonians are also doing more traveling, and the jump in demand for credit cards right before peak vacation periods shows that people are using plastic as an alternative to cash, Paavo Pold, analyst for Suprema Investments, said.

As further evidence of Estonia's embrace of credit, on Feb. 23, it became available via the Internet.

Estonia's largest leasing firm, Hansa Liising, unveiled their newest product, On-Liising, which offers credit decisions on vehicles and home leasing in an expeditious 15 minutes.

"Clients just hated waiting. 'Am I accepted or not accepted?' [they asked.] There was much uncertainty," said Hallar Loogma, project manager of product development for Hansa Capital, a holding company of Hansa Liising.

To facilitate the loan process, 12 Internet kiosks have been set up in Tallinn's major car dealerships, such as Elke Auto, Rahvo Auto, Fakto and Japauto. Prospective borrowers simply punch in their personal information, including their salaries, place of employment and the necessary phone numbers. Fifteen minutes later an answer arrives either by telephone or on the computer screen.

At Rahvo Auto, the kiosk has sat solitary in a back corner, but salesman Dmitri Onoprijuk said he expects it to be a more popular tool soon once people become more familiar with the program.

"Three years ago I had to take my papers to the bank, and I must wait a week [to get a loan]," he said.

Loogma said that the project is off to a promising start, though it will take some time to reach an accurate conclusion. On-Liising recorded about 50 applications during the first full day of operation, 90 percent of them for cars. Almost half of the applications were accepted, he said, and another quarter required additional information.

"People appreciate the quick response and are not frustrated even if the answer is negative. The main point for clients is to quickly learn of the possibilities and shortcomings and take respective action," Loogma said.

After initial results are evaluated, leasing decision options through the Internet should become available this month in Latvia and Lithuania.

Armas Ruutal, car salesman for Veho Eesti, was more leery of the benefits of the added technology.

"Estonians don't trust machines. If they need help, I will help them. . .most of them need it," he said.