Consumer finance lures foreigners

Mobile World store in Hà Nội offers zero interest installment payment plans on mobile phone purchase. - VNS Photo Đoàn Tùng

In late September, the Việt Nam Technological and Commercial Joint Stock Bank (Techcombank) reportedly sold its stake in the financial arm TechcomFinance to the South Korean credit firm Lotte Card, a member of Lotte Group, for 87.5 billion won or VNĐ1.73 trillion (US$76.9 million).

After being purchased by Techcombank in January 2015 from the Việt Nam National Chemical Group (Vinachem), TechcomFinance has VNĐ600 billion in charter capital.

The deal will allow Lotte Card to issue credit cards, provide installment financing services and consumer finance in Việt Nam, and target the local consumer finance sector, valued at VNĐ744 trillion as of June 30, 2017, equal to 12.4 per cent of the Vietnamese economy’s credit balance.

In mid-September, MCredit – the financial arm of the Military Commercial Joint Stock Bank (MBBank) – officially changed its name to MB Shinsei Consumer Finance Co Ltd, a step that helped MBBank completed selling a 49 per cent stake in MB Shinsei Consumer Finance to the Japanese bank Shinsei. The deal between the two banks was signed in November 2016.

Local consumer finance companies have also made their way to expanding market coverage, such as FE Credit – the consumer finance arm of Việt Nam Prosperity Joint Stock Commercial Bank (VPBank).

FE Credit in July 2017 raised its charter capital to VNĐ4.49 trillion from the previous VNĐ2.79 trillion. It has continuously increased charter capital from VNĐ1 trillion since being acquired by VPBank from the Việt Nam National Coal and Mineral Industries Group (Vinacomin) in June 2014.

According to FE Credit, the competition in Việt Nam’s consumer finance industry will get fiercer as more players enter the country, reducing market shares and comparative advantages of those already present in the market.

Economic and financial specialist Cấn Văn Lực said at an online conference on September 27 that consumer finance would help people afford their needs and manage their finances better.

It would further develop the sector of individual consumer spending - which accounted 67-68 per cent of Việt Nam’s gross domestic product (GDP) – having a positive impact on the country’s socio-economic development and stablising the financial market, he said.

According to analysts, the consumer finance business still has room to grow and the participation of both domestic and foreign companies will help boost the sector’s influence on the Vietnamese economy.