According to FiinGroup, consumer credit increased by an average of 66.3 percent per year in the period of 2015-2017, much higher than 20 percent of 2013-2014. The growth of 2018 reached 30.4 percent, lower than the average of 59 percent of the previous five years.
New financial companies appear
A report on Vietnam’s consumer finance market of FiinGroup has listed the current market share of consumer finance companies with figures that have changed significantly compared to 2017.
Accordingly, in 2018, although FE Credit was still the company with the largest market share with 47.3 percent, this rate decreased compared to 2017 (48.9 percent).
Not only FE Credit, three other big financial companies, Home Credit, HD Saison and Prudential Finance also faced a similar situation when the market share of 2018 was smaller than 2017.
In contrast, it was the rise of smaller companies like Toyota Financial Services, JACCS, Mirae Asset and MCredit. In particular, the appearance of MCredit was rated “impressive” when quickly accounting for more than five percent of the market share only in the second year after the launch thanks to focusing on cash loans, followed by SHB Finance and Easy Credit. By 2018, there were 16 consumer finance companies licensed to operate.
MCredit is a consumer finance joint venture between Military Commercial Joint Stock Bank (MBBank) and Shinsei Bank (Japan) launched at the end of 2016. In 2018, the outstanding loans of this company increased more than four times compared to 2017, reached 5.43 trillion dong. The intention of MBBank in 2018 was to double outstanding loans, however, it was still a low level compared to total outstanding loans (lower than five percent) as well as compared to the size of other consumer finance companies such as FE Credit or HD Saigon.
Are there more market shares to develop?
According to FiinGroup, consumer credit increased by an average of 66.3 percent per year in the period of 2015-2017, much higher than 20 percent of 2013-2014. The growth of 2018 reached 30.4 percent, lower than the average of 59 percent of the previous five years. However, consumer credit played an increasingly important role when consumer credit ratio in total credit for the economy increased from 12.3 percent (2016) to 17 percent (2017) and 19.7 percent (2018). However, this was still lower than the developed countries in the world (40 percent to 50 percent).
The updated report of RongViet Securities Corporation (VDSC) said that in terms of spending trends, in recent years, Vietnamese consumers were more willing to purchase high value items after covering essential living expenses, such as new technology products or vacations, to improve the quality of life..
At the same time, the consumption trend of Vietnamese people gradually changed in the direction of bank payment, and tended to be willing to borrow for the needs of life instead of saving to buy the desired product.
In the context of increased consumption, consumer behavior change, low proportion of consumer credit compared to total outstanding loans, as well as a large number of potential customers, banks and consumer finance companies still have plenty of room to boost consumer credit.
Currently, loans for buying or repairing houses, electronics and vehicles are the most important types in consumer credit. However, the expansion of outstanding loans at these loans has some difficulties.
The State Bank of Vietnam (SBV) has made a move to tighten loans for home loans. Other loans account for a high proportion because banks and consumer finance companies are approaching customers mainly through modern retail chains or e-commerce, which helps to bring high efficiency and save management costs.
However, their presence in chain channels is becoming dense, while the demand for motorcycles, phones, and electronics is gradually saturated.
According to Euromonitor data, electronics sales in 2018 decreased to 11 percent compared to the average of 13.9 percent in the previous five years. In addition, the Vietnam Association of Motorbike Manufacturers (VAMM) also recorded a slowdown in the number of motorcycles consumed in the past two years. Even in Q1/2019, there was negative growth over the same period.
VDSC evaluated that in addition to the above loans, other purpose loans still accounted for a modest proportion, due to the need for more resources in developing relationships with suppliers, customers and loan processing. Meanwhile, cash lending was also expected to be limited when management agencies were intending to tighten disbursement directly to customers. Therefore, the expansion of consumer credit outstanding in general would become more difficult than the previous period.
