According to regulators, peer to peer lending (P2P Lending) is a new business model and an innovative service based on digital technology that directly connects borrowers and lenders (investors) without financial intermediation.
In particular, P2P Lending companies provide a platform for online borrowers to directly connect and borrow from lenders. All lending and repayment (including principal and interest) activities between borrowers and lenders are recorded and stored in digital form by electronic trading platforms.
In Vietnam, the legal system does not have separate management regulations for P2P Lending but it is not prohibited, unless it is identified as banking activities, so this model has been in the market for about two years with 40 active companies.
According to deputy director of the Monetary Policy Department of the State Bank of Vietnam (SBV), Nguyen Chi Quang, P2P Lending, if well managed, will promote finance to develop comprehensively, especially in areas to which the financial system has not yet reached, where people, business households, small and medium companies have little access to financial and banking services at low cost and with simple procedures.
However, in some countries, P2P Lending has been exploited, causing instability to economic and social security. Rather than mediating information, some P2P Lending companies use multi-level model to attract and appropriate money and use raised money to lend indiscriminately, generating bad debts and insolvency. Some companies also offer illegal intermediary payment functions to appropriate capital.
These consequences are most evident in China and some Southeast Asian countries. Recently, when the Chinese government tightened P2P Lending management, P2P Lending companies tended to shift their operations to other countries including Vietnam.
Specifically, according to authorities, among 40 P2P Lending companies operating in our country, there are 10 companies originating from China and some companies from Indonesia and Singapore.
The SBV said that some of these 40 companies have disguised activities, violating the banking and credit laws.
Facing this situation, many ministries such as the Ministry of Science and Technology, Ministry of Planning and Investment, Ministry of Information and Communication, and Ministry of Finance and Justice all believe that there should soon be a suitable legal framework to manage P2P Lending. It must be considered as a conditional business licensed by a state agency. deputy Governor of the SBV, Nguyen Kim Anh, asked the government to issue a Resolution to carry out the policy and the prime minister to issue a Decision allowing pilot implementation to finalise and complete the legal framework.
The leader of the SBV proposed, in the immediate future, to manage P2P Lending within the scope of its current participants and activities: financial institutions are not allowed to participate and P2P Lending companies are not allowed to raise funds to lend.
Agreeing with these views, deputy prime minister Vuong Dinh Hue said that the draft Decision of the prime minister would stipulate P2P Lending’s traditional operation method, directly connecting borrowers and lenders, and consider allowing the participation of financial institutions.
In addition, the deputy prime minister stressed that the draft Decision clearly shows that the government strictly prohibits and will strictly handle the deformed behaviours of this new business model as violation of Clause 2, Article 8 of the Law on Credit Institutions in 2010: ‘Individuals and organisations that are not credit institutions must not carry out banking activities, except for margin trading, securities purchase, and resale transactions by securities companies.’
The deputy prime minister also requested ministries and agencies to continue to better assess the operational status of 40 P2P Lending companies in Vietnam. He assigned the SBV as the lead agency to draft the prime minister’s Decision, including the basic contents of risk management, inspection, and monitoring as well as responsibilities of relevant ministries and agencies.
