Consumer credit: risks loom large

Consumer credit has grown by five times in the last five years, according to the State Bank of Vietnam.

The Financial Times newspaper noted that Vietnam’s consumer lending field remains ‘young’. Vietnam has great potential to develop the field thanks to the young population (70 percent of people are 15-64 years old) and the high economic growth rate (over 6 percent).

Consumer credit: risks loom large
It's easy to access consumer loans

In late 2012, total consumer loans were VND230 trillion, accounting for 8 percent of total outstanding loans of the economy. By late 2017, the figure had reached VND1,100 trillion, or 4.8 times higher than 2012, accounting for 18 percent of total outstanding loans.

As of December 31, 2018, the total assets of finance and finance leasing companies had reached VND167.822 trillion, up by 18.27 percent over the end of 2017, while their chartered capital had increased by 17.2 percent and regulatory capital by 39.4 percent.

The consumer lending market includes Vietnamese and foreign banks, and 20 finance companies. While big loans are provided by banks, the loans with lower value are provided by smaller lenders.

According to Stoxplus, by the end of 2017, FE Credit, belonging to VP Bank, was leading the market with 50 percent of market share, followed by Home Credit Vietnam with 17 percent and HDSaison with 13 percent.

The consumer lending market includes Vietnamese and foreign banks, and 20 finance companies. While big loans are provided by banks, the loans with lower value are provided by smaller lenders.

Most of the clients of consumer finance companies are those with low and medium incomes.

With high NIM (net interest margin), finance companies have brought high profits to holding banks in recent years. FE Credit, for example, made up 45 percent of VP Bank’s profit in 2018.

VP Bank reported the pre-tax profit of VND9.199 trillion, an increase of 13.2 percent over the year before, while FE Credit’s pre-tax profit was VND4.118 trillion.

 

Meanwhile, HDSaison got VND480 billion in the first nine months of 2018, making up 21 percent of the total profit of VND2.263 trillion of HDBank.

However, analysts said after a hot growth period, consumer lenders are facing big problems, especially in debt management and bad debt settlement.

They said the pressure on the lenders is increasing because of the appearance of many more competitors.

In early August 2018, SHB Finance launched a comprehensive sales service, offering loans with no collateral required.

In June 2018, VietCredit presented itself before the public. Prior to that, within the first two months of that year, four consumer finance companies joined the market - EVN Finance, Lotte Finance, PT Finance and Prudential Finance.

However, a problem has arisen for consumer lenders. More people are becoming reluctant to access consumer loans following many complaints made by borrowers who said lenders were menacing borrowers, urging them to pay debts and providing inaccurate information that led to misunderstandings.

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