In recent years, consumer lending has contributed to improving people’s access to finance, providing opportunities to use financial services for low-income people. At the same time, it helps the poor avoid the vicious cycle when having to borrow “shadow bankers” with extremely high interest rates.
The group of consumer finance is mainly comprised of low and middle-income people, has no collateral and cannot prove income to meet strict regulations and high lending standards from banks. Meanwhile, the demand for loans for daily spending of this “non-standard” group of customers is very large and varied on all aspects of life.
Currently, in addition to working with electronics and retail businesses to buy and sell goods, financial companies are deploying many loan packages suitable for the specific needs of customers.
Most recently, consumer-lending activities have jumped into the aesthetic field, helping many women to have beauty care opportunities. According to incomplete calculations, consumer finance companies in Vietnam are serving about 30 million customers nationwide.
Nguyen Tu Anh, deputy director of Monetary Policy Department, the State Bank of Vietnam (SBV), said “Consumption proportion in Vietnam’s GDP has continuously increased with the growth of the economy. If in 2013-2014, the average growth of consumer credit was only about 15 percent per year, the period of 2015-2017 reached 61.3 percent per year, particularly in 2018 about 29.3 percent, much higher than the general credit growth rate and accounted for about 19.7 percent of the total debt balance of the whole system.”
“Consumer credit promotes consumption, thereby boosting economic growth, through impacting on aggregate demand. In recent years, consumer credit has increased at a rate many times higher than the growth rate of final consumption in GDP (2018 was 29 percent and 7 percent respectively), which indicates that consumer credit is an important tool to support consumer components in GDP, “continued Nguyen Tu Anh.
From the above data, it can be seen that consumer credit is a driving force for economic growth, ensuring that the reproductive process takes place continuously, increasing the ability to access official credit for people, especially the group of sub-standard customers, contributing to repelling “shadow banking”; helping low-income people solve urgent life needs, thus having the conditions to accumulate assets.
PhD. Nguyen Dinh Cung, director of the Central Institute for Economic Management (CIEM) pointed out that the emergence of the average income class in Vietnam during the past decade has led to a significant change in consumption behaviour, which means it is not necessary to “save first and then spending”, but it can be “pre-purchase and post payment”.
Meanwhile, the shortage of supply for small loans; the lack of access to official consumer credit (inclusive) when students get very little loans; even for customers who have access to loans, the demand for credit has not been fully met when over 50 percent of customers in finance companies and 60 percent in commercial banks are able to meet less than two thirds of capital needs, shows that the room for consumer finance market is huge.
“That means, the development of consumer finance not only repels” shadow banking “, but also a path, a driving force, a way for socio-economic development, opening up an opportunity to enhance welfare for people “, PhD. Nguyen Dinh Cung analysed.
Studies from the World Bank (WB) for decades have confirmed that the lack of access to and use of financial services by low-income groups in society is an important cause of income inequality and persistent growth decline. Therefore, comprehensive financial development is considered a pillar of sustainable economic growth and poverty reduction.
Like many countries in the world, in recent years, Vietnam has been very interested in comprehensive financial development to ensure the ability to meet the financial service needs of all members, especially the low income beneficiaries who are easily vulnerable in society.
Since 2016, the prime minister has signed Decision No. 1726 approving “The project to improve access to banking services for the economy, this is one of the very important projects for the economy. In general, especially for banks, businesses and individuals, the government is now assigning the SBV to be the focal agency to formulate a national strategy on comprehensive finance.
Nguyen Duc Long, director of ForecastStatistics DepartmentSBV, said: “A society with access to financial services extends to everyone will promote their participation in community life in general, improving fairness and equality, the capacity of the society as a whole is also raised “.
