VietNamNet Bridge - Vietnamese are increasingly borrowing money to spend on consumer goods as consumer loans had reached $5 billion by the end of 2017.

Vietnamese are increasingly borrowing money to spend on consumer goods

The high demand for consumer credit has prompted more and more investors to set up finance companies. The Cement Finance JSC has changed its name to VietCredit Finance Company, while EVN Finance has begun recruiting workers in large numbers to prepare for the operation. 

SeABank has announced the purchase of the entire capital contribution by VNPT at VNPT Finance. SHB at the 2018 shareholders’ meeting stated it will soon implement the plan on building a finance company of its own. 

Shinhan Bank has made its presence in the market by taking over Prudential Finance at $151 million. Lotte from South Korea has wrapped up the deal of taking over Techcom Finance at VND1.7 trillion.

Reports all show that finance companies have been expanding their business as they are encouraged by fat profits. FE Credit reported revenue up by 45 percent and profit up by 55 percent in 2017 compared with the year before. 

Meanwhile, Home Credit’s revenue in 2017 increased by 50 percent.

Even Mcredit, a joint venture of Military Bank and Shinsei Bank, which just joined the market last year, also reported profits in the first year of operation.

Regarding the market scale, a report of the National Finance Supervision Council (NFSC) showed that the consumer credit in 2017 increased by 65 percent, much higher than the 50.2 percent increase of the year before. 

Consumer credit now accounts for 18 percent of total outstanding loans, higher than the 12.3 percent of one year before.

It is estimated that the consumer credit market is valued at VND1,100 trillion, or $48.5 billion. However, if excluding the large loans provided to fund some house purchases, consumer credit for individual borrowers is valued at VND90 trillion, or $5 billion only.

Even with $5 billion, the consumer credit market is also very attractive. According to StoxPlus, about 48 percent of population with low income of less than $300 a month could be potential clients of consumer credit companies.

Analysts noted that in the last two years, some finance companies have begun pushing up lending via credit cards. The revenue from credit cards amounts to 2.8 percent of total consumer credit, which shows the great potential of the market segment, according to StoxPlus.

Some finance companies said they will focus on developing their own ecosystems. Mcredit, for example, is providing lending packages for purchase of motorbikes and home appliances by instalment, applied to soldiers in active service. 

Mcredit mostly targets individual clients who are working in enterprises with which the Military Bank has relations.

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