At the last National Assembly’s Q&A session, deputy Pham Thi Thanh Mai from Hanoi asked Governor Hong to clarify the legal framework for P2P lending and the management of the activities.

P2P lending, or lending via apps, became a hot issue after Hanoi police discovered a case of lending via an app worth VND5 trillion, causing big losses to people.

According to Hong, thanks to the development of information technology, many new products and services exist, including P2P lending. However, problems have arisen because of the lack of a legal framework.

In theory, P2P lending helps support financial popularization, increases capability and provides one more channel for accessing financial resources, especially for disadvantaged groups. However, in reality, there are many risks in P2P lending which can adversely affect and destabilize social security.

Hong said SBV is drafting a government decree to manage and control lending. In the time to come, the central bank will continue cooperating with ministries and branches to issue a legal framework to regulate activities, including sanctions on violators.

In May 2020, the Prime Minister instructed SBV to join forces with ministries and branches to design a pilot mechanism to manage P2P and other payments methods which have not been legalized.

Two years have elapsed, but the legal framework is still pending.

P2P lending awaits sandbox

After a sandbox was designed for Mobile Money, the first sandbox in the field of Fintech in Vietnam, the public hoped that there would also be a sandbox applied to P2P lending.

Tima’s CEO Tran The Vinh said the State should create a legal framework with clear regulations on P2P lending to eliminate disguised companies that cannot meet requirements to operate.

Half of the Vietnamese population are young people of working age who have high demand for financial services, but they meet a barrier when accessing official finance, especially people in rural areas. 

There is great potential for P2P lending to develop. Besides, the popularity of internet and smartphones have brought opportunities for P2P lending to access clients in all geographical areas.

According to Vinh, there are many lending apps in the market which introduce themselves as P2P lending and carry out illegal lending activities, a type of black credit. 

The apps trap users with easy online loans and simple procedures. However, the lending interest rates are exorbitant, which causes many people to fall into insolvency. Borrowers then face illegal debt chasing activities carried out by lenders, such as threatening borrowers and their relatives.

Tran Viet Vinh, Chair of Gomin Corp and CEO of Fiin Credit, said there should be a sandbox in the banking sector for P2P lending. This would help prevent and restrict illegal black credit, which takes unfair advantage of the internet environment and P2P lending to provide loans at exorbitant interest rates and appropriate people’s assets.

In addition, a pilot mechanism would help ease unhealthy competition, and prevent violations of laws by foreign individuals and institutions. These people, under cover of Vietnamese companies, provide loans at sky-high interest rates and wash dirty money.

The sandbox will help ensure cyber security, and protect users’ data and benefits. It will also create favorable conditions for startups’ innovations in the field of Fintech. 

The startups will have a legal framework to expand cooperation with financial institutions, credit institutions and investment funds. As such, people could easily find companies operating in accordance with laws, and avoid traps.

Le Minh Hai, CEO of Tienngay.vn, said the sandbox needs to be designed in a way that is more open to help P2P lending become popular among people and encourage innovative models that ensure investors’ and borrowers’ benefits.

He suggested a mechanism on sharing information about borrowers’ credit histories with banks and financial securities so as to have better risk management policies.

Duy Anh