Lending at exorbitant interest rates remains a headache in Vietnam as more than 7,600 criminal cases relating to predatory lending have been reported over the past four years in which lenders involved in murder, assault, robbery, and swindling. 

In most of the cases, the lenders have cheated borrowers by using unlawful lending conditions and assaults to track down borrowers, pushing them to the wall in most of the cases, Pham Huyen Anh, deputy chief inspector of the State Bank of Vietnam (SBV)’s Inspection and Supervision Agency, said at a conference this week. 

Thorny issue 

Experts at the event said that lending at usurious interest rates makes up a market share worth VND2.5 trillion (US$107.3 million) but no criminal penalties are imposed on loan sharks except murder. 

Usury in Vietnam is an action providing cash quickly and without asking for collateral. As a result, loan sharks thrive in rural areas, industrial parks and other places where people are in need of quick cash for a short term.

Vu Manh Tiem from the Vietnam General Confederation of Labor said that usury was widespread in industrial parks across the country, mainly in the central provinces of Thanh Hoa and Ha Tinh, and the southern provinces of Dong Nai and Binh Duong.

Besides loan-sharking, the explosion in peer to peer (P2P) lending is also a matter of concern for regulatory authorities.

Challenges remain

Pham Chi Quang from the SBV said P2P lending emerged in the last decade and is now widespread in Vietnam and available through intermediaries. But non-transparent procedures on lending, interest rates, and payment cause disadvantages to borrowers, leaving them miserable in many cases. 

The experts said that wiping out usury is not an easy task as up to 70% of Vietnamese people are unable to access bank loans, statistics by the World Bank (WB) showed.

The Vietnamese Civil Code forbids any loans with interest rate exceeding 20% per annum while the Criminal Code stipulates that any person giving loan with interest rate exceeding fivefold the ceiling established by the Civil Code would be handed jail sentence.

Hanoitimes