At the Seminar “Developing consumer creditSolution to repel shadow banking” organised by the Investment Newspaper on March 15, PhD. Can Van Luc, Chief Economist of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), said that Vietnam’s financial market has developed rapidly, especially in the past 20 years. The financial depth was shown by the size of credit provided by the credit institution system amounted to 7.2 quadrillion dong, equivalent to 131 percent of GDP by the end of 2018.
In credit sector, consumer lending was officially formed in Vietnam since 1995, but it has grown strongly in the last 10 years; thereby contributing to promoting economic growth (including consumption, production and trading of goods and services), increasing access to credit, reducing shadow banking, and limiting payment by cash. Besides, there have been still some problems that need to be solved.
Consumer finance should be interpreted as part of consumer credit. Accordingly, the consumer finance market in Vietnam began since the late 1990s, when this lending sector was implemented by commercial banks as part of retail banking products. However, the market has only developed since 2007 with the participation of consumer finance companies.
Consumer credit channel reduces shadow banking, contributing to a more diversified financial market. However, according to Can Van Luc, consumer credit in Vietnam also faces many challenges.
Firstly, the scale of consumer credit in Vietnam is still small. As mentioned above, the proportion of consumer loans in Vietnam accounted for 19.4 percent of total outstanding loans in 2018, about 1.4 quadrillion dong.
Secondly, the misconception that credit consumption is shadow banking is unfair.
Thirdly, knowledge of finance and credit of Vietnamese people and small businesses is limited.
Fourthly, the growth momentum as well as business efficiency of these financial companies will be difficult to maintain at the current level.
Sixthly, financial companies need to strengthen risk management and staff training.
From the current situation and challenges, Can Van Luc gave some suggestions:
Firstly, the government directs to finalise the National Strategy on comprehensive financial development, in order to synchronise socio-economic development strategies and solutions to increase the access of individuals and businesses to finance.
Second suggestion is to continue to improve the legal framework in the management and supervision of financial companies. In addition, the government directs to complete the legal framework (can be pilotedsandbox) for financial products associated with technologies such as Fintech, peer lending.
Third one is to create conditions for new and small financial companies to develop, to increase competitiveness, and limit the monopoly of a few large financial companies today.
Fourthly, it is necessary to strengthen financial education for consumers, especially in consumer finance products and personal financial management skills.
Fifthly, financial companies need to make better information transparency for customers regarding some issues such as interest rates, fees, calculation methods, deadlines, debt collection methods, late repayment penalties or early maturity payments, etc.
Sixthly, in order to ensure business efficiency and sustainable development, financial companies need to strengthen risk management and staff training.
Seventhly, the state management agency should urgently improve the national population database system.
Finally, consumers need to take action to protect their own interests as well as those of financial companies.
