At the seminar ‘Finding solutions to expand credit and ‘rescuing’ people from black credit’ held by CafeF and Tri Thuc Tre electronic newspaper in the afternoon of March 21, 2019, Dr Do Hoai Linh, lecturer of the Banking and Finance Institute of the National Economics University said that consumer loans from banks and financial companies, without requirements of collateral and with quick procedure, safety for borrowers, and wide network, can replace black credit.
However, Linh also acknowledged that with the 60 million population in rural, remote and isolated areas, the formal credit system does not meet the demand, and people hesitate contacting the official credit channel so black credit is still the main capital supply channel. Therefore, there is a need for more types of credit organisations in addition to financial companies to suit each customer segment with varied purposes and risks. They may be potential channels to restrain black credit.
However, it is not easy to expand consumer credit, especially with current lending limit regulations. On that basis, the expert also discussed whether to remove those regulations.
In this regard, Dr Do Hoai Linh said that, firstly, it is necessary to clarify that the limit of consumer lending in financial companies is 100 million dong according to Article 3 of Circular 43/2016 of the State Bank of Vietnam (SBV). In the formal credit sector, financial companies are not the only institutions to provide consumer loans. Therefore, there is no limit on consumer lending by other credit institutions such as banks.
According to her, the limit of 100 million dong is tight. She recommended that it should be changed to a ratio on equity of the financial company, similar to the ratio of credit limit in Circular 36/2014/TT-NHNN, so it would be more appropriate for the safety management of financial companies while improving the maximum amount of credit to meet customers’ needs.
Banking expert, Dr Nguyen Tri Hieu expressed his disagreement to any limit on consumer lending for both microeconomy and macroeconomy. Because, according to him, consumer credit has a ratio of about 20 percent of total outstanding loans but in fact the demand and supply capacity is much higher. ‘Applying a limit is unreasonable because, compared to other countries in our region, our consumer credit is still small and growing. Banks and financial companies should be free to choose appropriate extent of credit expansion to suit their budget and customers,’ said Hieu.
Discussing the loan limit of 100 million dong in Circular 43, Dr Nguyen Tri Hieu said there is no foundation to prove that it is a reasonable level. ‘If it fits, it is still consumer credit, why putting a limit?’ asked he.
