Previously, the global cashew market was mainly supplied by both Vietnam and India, of which the Vietnamese side accounted for more than 80%.

Recently, African countries have become increasingly prominent suppliers of cashew nuts, causing the Vietnamese market share of the product in the world market to shrink.

In a recent international conference, N'Guettia Assouman, chairman of the Ivory Coast Cashew Exporters Association revealed that with 25% of the world's raw cashew output, the Ivory Coast ranks second in terms of cashew imports and exports globally, only behind Vietnam.

Vietnam is currently consuming 65% to 85% of the Ivory Coast's raw cashew output, while the African country’s cashew industry is gradually modernising production and processing to boost exports to demanding markets such as the United States and the EU.

Meanwhile, Mohamed Diaoune, chairman of the Guinea Cashew Industry Association pointed out that the Republic of Guinea has set up stable raw material areas in order to supply cashew nuts to Vietnamese businesses, noting that Vietnam has so far been one of Guinea’s major customers of raw cashew nuts.

According to details given by experts, Africa accounts for 57% of global raw cashew production. The robust growth of the cashew production and processing industry in Vietnam and other African countries has led to fierce competition in the global market.

Pham Van Cong, chairman of the Vietnam Cashew Association (VINACAS), said despite being a cashew processing hub, Vietnam does not have raw material areas, with the domestic growing area and output increasingly shrinking.

Recently, African countries have issued policies aimed at limiting the sale of raw cashew nuts to develop the domestic cashew processing industry, thereby putting more pressure on raw cashew prices moving forward.

Facing these challenges, local manufacturers and processing enterprises ae required to adjust the operation of the cashew supply chain in order to develop the cashew industry in a sustainable manner in the time ahead.

Over 60% of Vietnamese use QR codes to pay

QR codes are used to pay by over 62% of Vietnamese. On average, they scan the code 16.2 times per month, which is higher than card usage (around 12-13 times per month), a survey conducted by Visa revealed.

This suggests that as QR code payments grow alongside the development of digital wallets,  the need for cash in the wallets of Vietnamese people is decreasing.

According to a recent Visa study on consumer payment behavior in 2023, the average time Vietnamese people go without spending cash is 11 consecutive days per month, almost four times as long as in 2022.

In addition, 56% of respondents said they carry less cash. "This means they are not keeping cash in their wallets and spending less cash," said  Dang Tuyet Dung, Director of Visa Vietnam and Laos.

Another indication from the market also is that Vietnamese people are gradually reducing their need for cash withdrawals. According to the State Bank of Vietnam (SBV), as of the end of January, there were 20,986 ATMs in the market, a decrease of nearly 2% compared to the same period in 2023. The ATM overload phenomenon during holidays no longer occurs.

For example, payment technology company Payoo witnessed a three-fold increase in QR code payments on its network last year compared to 2022. Payment via QR code is also faster than other methods, such as domestic ATM cards (10%) and international credit cards (nearly 30%).

This payment intermediary explains the explosive growth of QR codes last year thanks to VietQR, which allows retailers to accept payments without investing in a POS system. Instead, they simply print a QR code to receive transfers that cost '0 dong' to process.

Customers also find it convenient as they do not need to enter an account number but simply scan the code when transferring money. Last year was also the time when banks and payment intermediaries launched multi-purpose QR codes that are accepted by both banking apps and e-wallets.

Vietnam also ranks leads Southeast Asia in terms of new e-wallet users. It is reported that  4 out of 5 people regularly use e-wallets, with young users (Gen X) and affluent customers being the most common. The number of e-wallet users in Vietnam is expected to reach 50 million by the end of this year, up 28% from last year, according to FiinGroup data.

Visa says that Gen X and Gen Y play a pioneering role in driving cashless payments, with 89% of respondents using digital payments.

In 2023, Vietnam led Southeast Asia in the transition to cashless payments, with 88% of people having used this method before. "Vietnam has never seen such a strong conversion to digital payments," said Dung.

The cashless trend continues to grow. The SBV says that cashless transactions increased by over 63% in the first month of this year. Among the methods, QR code payments are leading the way with an almost 900% increase in volume and over 1000% in value.

Preferential loans of US$68.5 mln dedicated to high-tech agriculture

Ten branches of the Vietnam Bank for Agriculture and Rural Development (Agribank) pledged preferential loans of up to  VND1.7 trillion (US$68.5 million) for over 383 customers operating in the field of high-tech agriculture.

The State Bank of Vietnam- Ho Chi Minh City Branch this morning collaborated with the People’s Committee of Cu Chi District and the Southern Representative Office of Agribank to host a Bank – Enterprise Connection Conference in order to support enterprises, cooperatives and household businesses in agricultural field in Cu Chi District.

The conference was taken place at the People’s Committee of Cu Chi District.

Accordingly, Agribank pledged loans for developing key and potential products in agricultural and rural sectors with preferential interest rates 2.5 percent lower the ordinary rate of the bank.

Speaking at the conference, Deputy Chairman of the People’s Committee of Cu Chi District Le Dinh Duc desired that the banking sector would pay more attention to accelerating preferential loan sources for enterprises, cooperatives and household businesses to promote their business and production activities in the locality, contributing to the general growth of the whole city.

At the current time, Cu Chi District is calling for investment in urban agriculture, eco-tourism in the riverside of Saigon River. Therefore, the locality is calling on economic sectors together with the banking sector to join the investment and affirmed to create favorable conditions for investment activities.

Vietnamese timber and wooden furniture exports to Canada surge

Timber and wood furniture exports to the Canadian market during the opening two months of the year surged by 47.4% to reach US$36 million against the same period from last year, according to statistics released by the General Department of Vietnam Customs. 

Wooden furniture remains the main export item to the Canadian market in January, with export turnover reaching US$22.3 million and accounting for 86.2% of the total export turnover to the demanding market.

This figure represents an increase of 15.2% compared to December, 2023, and a rise of 176% compared to January, 2023.

Apart from wooden furniture, a number of other wood products to the market experienced an upward trend in January, with wood flooring board and fine art wood exports increasing by 22.8% and 294.9%, respectively.

Canada's demand for imported wooden furniture grew by an average of 3.1% in the 2019 to 2023 period, according to data compiled by the Statistics Canada.

Last year, due to the impact of high inflation, Canadian imports of the product plunged by 14.8% to US$2.3 billion compared to 2022. In January, there were positive signs recorded for the import demand with turnover surging by 11.8% to US$191.6 million compared to figures recorded in January, 2023.

China, the US, Vietnam, and the EU make up the four main suppliers of wooden furniture to the Canadian market with turnover accounting for 85.9% of the total import value. Most notably, Canada increased imports from China and Vietnam, but reduced imports from the US and the EU.

Industry insiders pointed out that there remains plenty of room for Vietnamese wood furniture exports to the Canadian market as the import value from Vietnam in the demanding market remains low.

Moreover, Canada can be considered as a gateway for Vietnamese wooden furniture products looking to gain entry to the North American market.

Therefore, local firms are advised to fully utilise the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as a means of promoting the export of the product to the fastidious market moving forward.

Vietnamese businesses are advised to be extremely cautious and proactively update market information as a way of devising effective export strategy and avoiding trade fraud, as well as timely handling trade barriers erected by the stringent market.

Expectations rise for medical devices

While supporting recent improvements in the process of granting marketing authorisations to medical devices, multinational corporations continue to seek for new positive changes to facilitate their plans.

Decree No.96/2023/ND-CP taking effect from January 2024 is bringing fresh air to the business community and eases some concerns over marketing authorisations (MAs) for medical devices by having regulations on prioritising processing of medical device registration applications for some certain cases.

They include domestically made devices, imported ones having submitted an application for a medical equipment import licence to the Ministry of Health (MoH) before January 2022 but having not yet been granted an import licence and having submitted an application for MA, and those to implement new methods applied in medical treatment that are approved in writing by the MoH, but have not been granted MAs in Vietnam, among others.

Decree 96 solves a problem related to a lack of regulations on prioritising processing for advanced medical equipment, systems and technologies in previous decrees, which caused a backlog for Class C and D medical device dossiers.

Nguyen Tu Hieu, deputy director of the MoH’s Infrastructure and Medical Device Administration (IMDA) said that over past months, the ministry has taken actions to quicken granting MAs to medical devices, including Decree No.07/2023/ND-CP amending and supplementing a number of articles regarding the management of medical equipment.

“In addition, to ensure supply and access to medical equipment, especially new equipment and new technology, the ministry continues to advise the government to issue Decree 96 supplementing the regulations on prioritised cases for granting MAs to increase the access as quickly as possible,” he added.

According to the MoH’s statistics, the number of MA numbers issued at the end of 2023 increased six times compared to early 2023.

In late 2023, the IMDA and the Medical Devices and Diagnostics Sector Committee (MDDSC) of the European Chamber of Commerce in Vietnam (EuroCham) signed an MoU on enhancing the regulatory climate and healthcare access towards promoting technological advancements in the medical device sector.

“This MoU is a significant landmark, promoting cooperation and knowledge sharing with leading European medical device manufacturers but also international regulators. Our goal is to strengthen this collaboration and to transfer knowledge towards Vietnam’s medical device sector, focusing on the welfare of Vietnamese patients,” said Fabian Singer, vice chairman of the MDDSC.

This collaboration aims to enhance regulatory and legal efficiency, emphasising key areas like expedited criteria for critical product registrations and authorisations, price negotiation, and central procurement for selected supplies, among other topics.

Nevertheless, recent improvements have not fully met expectations among multinational corporations of the MDDSC. According to EuroCham, Decree 07 has prolonged the import licence and marketing authorisation’s expiration date to the end of 2024. This extension allows the MoH more leeway to evaluate and issue marketing authorisation numbers for Class C and D medical devices. However, the rate of approval for these devices remains noticeably low.

The chamber warned that several factors contribute to the delay, such as recent upheavals in the sector, including manpower shortage, inadequate legal frameworks, and challenges in adapting to the swiftly changing medical trends. This situation sparks concerns over possible supply chain interruptions if these devices are not approved by 2025.

At EuroCham’s WhiteBook Launch 2024 held in January, Singer requested the MoH’s support in accelerating product registration processes. “This is particularly vital for Class C and D medical devices, where we advocate for quicker evaluation and authorisation to ensure their consistent availability for the Vietnamese people and to facilitate access to modern and innovative technologies sooner,” he said. “Moreover, we propose a mechanism for fast-track marketing authorisations for products with valid import licences or previous marketing authorisations that currently require a new submission due to changes, to prevent supply shortages in the hospitals.”

He elaborated that another key focus is the tendering process for devices. “We suggest clear guidelines for tendering procedures, especially the cost-per-test model, and advocate for adjustments in tendering that prioritise quality over just technical specifications and price. This approach better reflects clinical benefits,” Singer said.

Additionally, to alleviate the financial burden of costly treatments and promote healthier habits, the MDDSC recommends supplementary health insurance and health insurance funds and budgets to facilitate early detection and screening, prevention and primary health. This shift addresses the evolving health needs of a developing and ageing population, facing diseases such as lung cancer, breast cancer or cardiovascular disease.

“We urge the MoH to update regulations, ensuring access to modern medical devices and new clinical services for Vietnamese patients. We finally propose regular updates to the list of Medical Technical Services and collaboration with Departments under the MoH and Vietnam Social Security for cost calculation of these services,” Singer proposed.

Moody's upgrades the outlook of Techcombank 2024

The credit rating organisation Moody's announced an update of the outlook for Technological and Commercial Joint Stock Bank (Techcombank) to stable.

Baseline Credit Assessment Index (BCA) of Techcombank continues to be in the group of leading banks in terms of business profile and risk profile, with affirmed rating of Ba3.

Techcombank is the first bank to have an outlook upgraded by Moody's in 2024, reflecting the rating agency’s recognition of the bank’s resilience throughout challenging environment of 2022-23. The ratings, BCA affirmation and outlook revision to stable are based on Techcombank's above industry average capitalisation and profitability, supported by its stable funding. Specifically, Techcombank's capital adequacy and performance ratios continue to be higher than industry averages, supported further by diverse funding sources.

According to Moody’s report, Techcombank's above industry average capitalisation and profitability will support its ratings. Its Tier 1 capital ratio was at 14 per cent as of the end of December 2023 while its return on average assets (ROAA) was 2.4 per cent in 2023, compared to the peer average ROAA of 1.4 per cent over the same period.

Data published by S&P Capital IQ at the end of February 2024 on the ROA index of South East Asia and India banks with book value of more than US$3 billion during 2019-23, revealed that the Central Asian Bank (BCA) of Indonesia and Techcombank are leading with ROAs of 3.1 and 3.0 per cent, respectively.

Techcombank's funding and liquidity will remain broadly stable. Its deposit base improved in 2023 with gains in its current and savings account deposits (CASA) ratio to 40 per cent, a level that is one of the highest among Vietnamese banks rated by Moody's. The bank's efforts to mobilise deposits and the satisfactory liquidity in the system supported its good deposit growth in 2023.

Moody's expects credit risks from the bank's sizeable exposure to the real estate sector to stabilise over the next 12-18 months. Moody’s assessed that Techcombank will benefit from the recovery of the real estate market, as home purchases increase, contributing to a rise in both absolute and ratio of home loans to real estate loans. This remark is particularly derived from the bank’s focus on lending investors, developers of real estate of better quality than the market's average level. Moody’s said that Techcombank's credit risk related to real estate loans will be stable over the next 12-18 months.

According to Moody's, real estate transactions in Việt Nam have shown many positive signs, with market supply expected to increase, in an environment where interest rates have fallen sharply from 200 to 300 points recently. The recovery of the economy, plus positive and timely policies and direction of the Government will contribute to a stronger recovery of the real estate market in the near future. High capital adequacy ratio, and ability to operate effectively (including profitability) is also an important factor in Moodys' assessment. 

Fruit and vegetable exports gross nearly US$1.25 billion in Q1

Vietnamese fruit and vegetable exports in the first quarter of the year soared by 27% to nearly US$1.25 billion against the same period from last year, according to data released by the Vietnam Fruit and Vegetable Association.      

This marks the first time that Vietnamese fruit and vegetable exports have exceeded US$1 billion in the reviewed period, with major consumer markets being China, the Republic of Korea, the United States, Thailand, and Japan.

Dang Phuc Nguyen, general secretary of the Vietnam Fruit and Vegetable Association, attributed the recent robust export growth to the overseas sales of durian fruit.

Most notably, Thailand increased its purchases of Vietnamese durians, turning it into the fourth importer of Vietnamese fruit and vegetables.

As of the end of February, among the top 10 Vietnamese fruit and vegetable export markets, exports to Thailand grew by 125.9% to reach US$28.6 million on-year.

Nguyen pointed out that with tourism strengths, Thailand is capable of attracting a large number of Chinese tourists, many of whom love to eat durians. 

However, the Thai durian season lasts for only four months per year, while Vietnamese durian boasts a competitive edge thanks to its all-year around harvest. Therefore, Thailand tends to import the fruit in order to serve tourists.

Along with durians, major Vietnamese fruits and vegetable exports include dragon fruit, bananas, and mangoes.

Meanwhile, fruit and vegetable imports in the first quarter are estimated to be at nearly US$500 million, up more than 19% against the same period from last year.

Garments and textile heads demand assistance

At a conference on March 14 to resolve difficulties in manufacturing and to promote growth and macroeconomic stability, Le Tien Truong, chairman of Vietnam National Textile and Garment Group (Vinatex), provided a stark overview of the garments and textiles industry with the prime minister and numerous business leaders from various sectors in attendance.

Truong said that in 2022-2023, major textiles exporters such as China, Vietnam, India, Bangladesh, and Turkey had all seen growth.

In that period, all of the above countries, excluding Vietnam, depreciated their domestic currencies to support exports. Turkey depreciated its currency the most, cutting its currency in half, with Bangladesh devaluing by 21 per cent, and China by 11 per cent.

As a result, Vietnam's textile products have been 15 per cent more expensive than other countries in the top five. "This is also the reason why in 2022 and 2023, Vietnam's garment exports fell by 10 per cent, representing the largest decrease among the five major textile exporting countries," Truong said.

The common interest rate level of these countries is at 3.5 per cent. In Vietnam and at Vinatex, the average loan level is about 7 per cent for businesses with good credit and about 9 per cent for businesses without. Vietnam has the most positive real interest rates among this group.

Truong provided data related to Vinatex's financial status from the past five years. Specifically, the interest rate paid to banks in 2023 (on the consolidated report) increased by 10 per cent on year, while the total outstanding debt declined by 11 per cent.

"This means the cost is more compared to 2022, and interest payable surged by 30 per cent compared to 2021. Based on current credit contracts in the first two months of 2024, the total interest payable in 2024 is not expected to be lower than in 2023," according to Trung.

Truong explained that it is not very difficult for them to access credit, but during the past 18 months, the raw material production industry has been struggling. "The garment and textile industry worldwide, including Vietnam, is lost. In 2022, it was easy to access capital, which became increasingly difficult in 2023, and especially challenging at the end of 2023 and early 2024," he urged.

Banks are currently cutting loans for companies, or requiring 100 per cent collateral for short-term loans. The interest rate and credit policy is about 7 per cent for state-owned joint stock commercial banks, and about 9 per cent for non-state-owned joint stock commercial banks.

Interest rates are currently falling, but disbursement is proving difficult. The market is also much more competitive than it has been in the previous two years as China reopens for business. By the end of last year, China's textile industry's capacity had reached 60 per cent.

China has also supported electricity prices at 4 cents/kWh for the industry, equivalent to half of Vietnam's prices, and 50 per cent for domestic transportation prices, since last March. Bangladesh does not require health insurance and offers a very low minimum wage of $15 per month.

Trung went on to say, "150,000 employees are working in this industry, with around $1 billion paid out in salaries, and about $500 million spent on electricity every year. It is therefore necessary to support producers this year by not reducing credit limits and not requiring fixed collateral."

High-tech mindset favoured for advances in processing

Processing and manufacturing continues to lead the way in foreign investment mobilisation - however, moving towards a high-tech industry is essential for long-term and sustainable development.

The Ministry of Planning and Investment’s Foreign Investment Agency has revealed that processing and manufacturing led among 16 sectors in the first two months of the year, with a total investment of $2.54 billion, capturing 59.1 per cent of all foreign direct investment (FDI) in the country, 16.8 per cent higher than the same period last year.

In January, FDI disbursement was $1.48 billion, up 9.6 per cent on year. Of this, disbursement of processing and manufacturing was $1.15 billion, making up 77.7 per cent, which is a positive movement reflecting investor confidence in the future, and their desire to do long-term business in the country.

Specifically, a series of foreign-invested projects were licensed in the first two months of the year in the southern provinces. They are not large in scale, but use new, environmentally friendly technologies, and less labour-intensive processing and manufacturing.

The largest projects are a $278 million venture from BOE Audio-Visual Electronic Technology from China in the southern province of Ba Ria-Vung Tau; and SLP Park Loc An Binh Son in Long Thanh district by Sea Fund I Investment 14 from Singapore, with registered capital of $121.4 million.

In addition to new licensing projects, capital increase projects also have investment levels of up to hundreds of millions of US dollars. Among them, the coffee factory project from Nestlé Vietnam in Long Binh Industrial Park (IP) has increased capital by $100 million, bringing the total thus far to just over $500 million.

A project with a fairly large capital increase is the tyre factory of Kenda Rubber Company (Vietnam) in Giang Dien IP, increasing by $80 million and bringing the total to almost $300 million.

Hyosung Group from South Korea is investing in a processing and manufacturing project in which renewable diesel and sustainable aviation fuel are produced through hydrogen catalytic treatment of oils and fats. The project has a total estimated investment of nearly $400 million in Ba Ria-Vung Tau province. In just a short time, Hyosung has invested in three large-scale projects in the province, with a total expected funding of $1.66 billion.

In the first week of March, two big events related to the semiconductor chip industry in Ho Chi Minh City took place. The Saigon Hi-Tech Park signed a cooperation agreement with Siemens EDA to train human resources in the semiconductor chip industry, while BE Semiconductor Industries N.V Company of the Netherlands completed preparations to put chip packaging machinery into operation in the same high-tech park.

In northern provinces, numerous high-quality industrial projects in key fields have been registered and set up, such as the $45-million Goodway Vietnam factory construction project from a Taiwanese investor in Lien Ha Thai IP in the northern province of Thai Binh, producing connection devices and computer peripherals.

At the end of February, the Quang Ninh Economic Zone Management Board delivered investment certificates to two foreign-led projects worth over $330 million. They are the $275-million Gokin Solar Hai Ha Vietnam initiative involving photovoltaic monocrystalline silicon panels and more at Texhong Hai Ha IP; and the $57-million bearings and equipment manufacturing scheme at Song Khoai IP in Quang Yen town, funded by IKO Thompson Vietnam.

Gabor Fluit, chairman of the European Chamber of Commerce in Vietnam, said at last week’s Binh Phuoc investment promotion forum that businesses in high-tech agriculture, construction, tourism, banking and finance, and renewable energy were truly interested in investing in Vietnam.

“European businesses are pouring capital into high-tech processing and manufacturing industries that Vietnam is looking to draw in investment in,” Fluit said.

Last year, the processing and manufacturing industry lured over $23.5 billion of FDI, accounting for 64.2 per cent of total registered FDI in Vietnam and an increase of 39.3 per cent compared to 2022. This raised processing and manufacturing to become the largest foreign-invested industry out of 18 economic sectors.

When it comes to the number of new projects, the manufacturing and processing industry is also the leading industry in the number of projects, and capital adjustments, accounting for 33.7 per cent and 54.8 per cent, respectively.

As of the end of February, there are more than 17,000 foreign-invested projects in this industry, with a total investment of about $285.4 billion, many-fold higher than other industries.

The Ministry of Industry and Trade recognises that the processing and manufacturing industry is the foundation and driving force for the growth of the entire industry and the economy, and the top industry in attracting FDI because Vietnam has the advantage of large and quality labour, a stable macroeconomic policy, and an open and safe market.

“The processing and manufacturing industry is the spotlight of industrial production, the main determinant of the growth rate of the entire industry, creating the greatest added value for the industrial sector and the main driving force in the country’s economic growth over the past years, contributing to successfully implementing socioeconomic development,” said Minister of Industry and Trade Nguyen Hong Dien.

Bank credit registers slight fall in first two months

Banks saw low credit growth in the first months of the year, a situation they are looking to resolves as balance sheets remain high.

At a conference on resolving difficulties for production and business on March 14 chaired by the prime minister, Nguyen Quoc Hung, general secretary of Vietnam Banks Association (VNBA) said that as of the end of February, economic credit decreased by 0.72 per cent on-year.

Of this, the agricultural sector reduced by 0.17 per cent, the construction industry by 0.13 per cent, trade and services by 0.91 per cent, and consumer loans by 1.77 per cent, while real estate credit rose by 0.23 per cent.

"However, low growth in the first months of the year is common" Hung said.

Average credit growth in the first two months of the year in the period 2013-2023 was 0.56 per cent. However, in 2014–2018 and 2024, credit growth rate in the first two months of the year was negative.

The VNBA pointed out several challenges in the banking industry, like difficulties in the capital market. World geopolitical conflicts have disrupted supply chains, and orders have dropped, leading to depleted resources and assets.

The banking industry is struggling with existing bad debt pressure, and the real estate market is quiet, so it is very difficult to handle collateral and bad debt recovery.

Moreover, consumer lending by financial companies faces many difficulties as many borrowers deliberately do not repay their debts, so credit institutions have narrowed their scope and loan objects. High-tech crime fraud and money laundering crimes are increasingly bold and sophisticated.

"The implementation of some programmes and policies under the direction of the government faces many difficulties and problems with legal regulations related to social housing, some conditions for home buyers do not match the customer's resources, income source and debt repayment ability," Hung said.

The VNBA said that bank credit flows are only additional capital flows, not the main flows to help businesses overcome difficulties and promote economic growth.

"The banking industry's own efforts are not enough. Businesses need the support of all ministries and agencies to remove obstacles," Hung said.

Phan Duc Tu, BIDV chairman, said that credit balances in the first two months of the year decreased by 0.72 per cent compared to the end of 2023, which is not overly concerning as it aligned with market trends and issues that could be rectified to achieve the 15 per cent credit growth target.

Specifically, credit supply factors, including several key issues such as proactive and flexible monetary policies to stimulate credit growth by the SBV, have been effective.

Liquidity in the system is ample. Additionally, the SBV has set credit growth targets for the entire year, and deposits and sources of funding for credit institutions are substantial.

Meanwhile, interest rates have continuously decreased since the second half of 2023, and it is expected to remain low throughout 2024. Credit institutions are striving to provide loans to achieve business results.

However, Tu highlighted three limiting factors affecting credit supply.

"The increase in NPLs affects individual credit institutions and the entire system; the issue of customers borrowing from multiple banks makes it difficult for credit institutions to control cash flows; and asset values ​​have declined, with the consequences of lending without recovering debts significantly," he said.

Looking at the demand side, there are four fundamental factors supporting demand, he said.

The decrease in credit demand in the first two months of the year is mainly cyclical due to the Lunar New Year and business culture. This is the main reason for the decrease in outstanding loans in the first two months compared to the end of last year.

Additionally, the macroeconomic situation has continuously improved, showing a positive trend, despite a decline in February, but overall, the first two months were very positive.

With this trend, the GDP growth target (6-6.5 per cent) and inflation (3.5-4 per cent) will be achieved, growth drivers will recover, and credit demand will increase rapidly.

"Notably, improvements in consumer demand and exports are positive, both domestically and internationally. Public investment disbursement will be accelerated; the labour market and real estate market are gradually recovering, with clearer forecasts from the second quarter onwards, thereby stimulating credit demand," Tu said.

Nguyen Duc Vinh, CEO at VPBank emphasised revisiting which driving forces growth depends on.

The first aspect is public investment – Vietnam has done a lot in this regard, as well as supporting large enterprises and simultaneously promoting exports, international relations, diplomacy, and multilateralism.

"However, there is an area where we have not carried out much yet, which is stimulating domestic consumption," Vinh said.

"This issue has been mentioned, but is not yet effectively addressed. There should be a government programme specifically addressing domestic consumption as a major issue."

Secondly, there is excess money in banks, and tens of trillions are idle. Banks want to lend, but conditions should be met. VPBank has more than 40,000 enterprises, with a credit limit of $10 trillion, but currently, only over $2.5 trillion has been disbursed due to various reasons.

"These are businesses that meet standards but lack outlets and production plans. Therefore, the state needs a separate initiative to support through fiscal policies, as credit policies alone are not enough," he said.

The third aspect is the issue of interest rates, according to Vinh.

"The government, the SBV, and businesses also want lower interest rates. This is very reasonable, but reducing rates depends on many factors. Interest rates have decreased significantly, but there is another crucial factor, which is procedures and associated costs that cannot be reduced," he said.

Finally, bad or unprofitable debts are an area that will exist indefinitely alongside banks and the economy, so it needs to be addressed.

"Handling bad debts should be a matter of extreme concern for the state, and it deserves a separate law to address bad debts. In practice, banks encounter more and more difficulties in dealing with debts, not only unrecoverable debts but also increasing costs and capital," Vinh added.

Bancassurance inspections imminent

The Ministry of Finance is going to conduct inspections on six insurers, with a focus on those involved in bancassurance.

A report has been submitted by the ministry (MoF) for the Q&A session of the National Assembly Standing Committee, scheduled for March 18. The report highlights issues in the management of the insurance business sector, particularly in life insurance and concerning the quality of advisory services, customer care, and claims settlement.

“The emergence of new distribution channels, such as bancassurance, alongside traditional agent channels, has added complexity to the market. While these channels diversify insurance operations, they also require careful reconsideration and rectification,” the report said.

In past years, the MoF has taken proactive steps to improve the implementation of insurance products, focusing on the bancassurance channel. Measures include enhancing regulations, standardising contracts, and increasing transparency. State agencies are also ramping up inspections to prevent forced insurance purchases and ensure accurate advice.

The report revealed that in 2022 and 2023, the MoF conducted inspections and examinations on 10 out of 17 life insurance enterprises selling insurance through credit institutions and foreign bank branches.

During these inspections, violations were uncovered in the bancassurance channel, including breaches in regulatory processes and compliance with product fee schedules, as well as instances of insurance agents failing to adhere to company and legal regulations.

As a result, a financial settlement totalling approximately $913 million was proposed, including deductible expenses excluded from corporate income tax calculations for 2021 and 2022, amounting to over $85 million.

Minister of Finance Ho Duc Phoc emphasised that Vietnam’s insurance market will prioritise the development of quality and aim to “harmonise benefits and share risks”.

“Achieving quality and sustainable development requires a gradual process, not an immediate change,” he said. “This will require coordinated efforts from regulatory agencies, along with active involvement from insurance businesses, the Vietnam Insurance Association, and policyholders in implementing tangible actions.”

In 2024, the ministry plans to conduct inspections on six insurance businesses, with a specific focus on the implementation of related sales through credit institutions and foreign bank branches by Mirae Asset Prevoir and Cathay Life Vietnam.

Bancassurance has encountered significant challenges in the market over the past year. In November, the State Bank of Vietnam issued Circular No.67/2023/TT-NHNN to address these issues and promote sustainable development of the distribution channel.

The circular not only highlights the prohibition of bundling life insurance products with credit products but also outlines specific requirements regarding banking infrastructure and human resources necessary for banks to prepare when distributing life insurance products.

In January, amendments were approved to the Law on Credit Institutions, effective from July, with some provisions taking effect from 2025. The law now prohibits the practice of “tying the sale of optional insurance products to the provision of banking products and services”.

According to Can Van Luc, BIDV’s chief economist, this amendment aligns with regulations outlined in Circular 67, aiming to safeguard the rights and interests of consumers in response to recent customer complaints.

“This new regulation will directly impact bancassurance activities, a significant non-interest revenue source for credit institutions. Consequently, it is expected that credit institutions may experience a reduction in revenue from this segment in the short term, particularly concerning optional insurance products,” he said.

From a revenue perspective, despite the flourishing years of 2020-2022, the majority of commercial banks experienced a decline in bancassurance revenue in 2023, although not all banks publicly disclosed this figure.

Notable decreases were reported by SeABank, Techcombank, and TPBank, with income from bancassurance decreasing by 73, 62, and 57 per cent, respectively, in 2023. VIB and MBB also reported declines of 33 and 19 per cent in income from this segment, respectively.

“The most unreasonable thing about implementing bancassurance in Vietnam is that the bank hasn’t prepared an appropriate infrastructure. Unlike other traditional banking products, insurance products need a consultation to thoroughly assess their suitability to customers,” said Le Hoai An, a banking consultant and trainer at Integrated Financial Solutions.

“An insurance product consultant at the bank must be trained and positioned as a product consultant and aimed at exploiting customer financial needs rather than exploiting the existing customer base for sale enhancement,” he said.

Source: VNA/SGT/VNS/VOV/Dtinews/SGGP/VGP/Hanoitimes