Consumer finance: Safety management for investors and consumers

VIR's editor-in-chief Le Trong Minh chairing the workshop

At the roundtable discussion, representatives of management agencies, experts, and businesses discussed situations, potentials, and the role of consumer finance in socioeconomic development, as well as recommended solutions for the sustainable development of consumer credit, safeguarding both investors and consumers. This was the second time VIR has held a seminar with this theme.

According to Le Trong Minh, VIR’s editor-in-chief, chairing the workshop, the consumer finance market in general and consumer credit in particular are developing fast in Vietnam. This is thanks to the efforts of banks and consumer finance companies to provide suitable products and services, matching the bourgeoning demand for finances for consumption.

However, the fast development of this sector makes it vital to develop the legal framework, further improving the quality of the services of suppliers. Communications is also necessary for all people and consumers to understand consumer finance and its role in socioeconomic development. In this, banks and finance companies play the most important role.

The Vietnamese consumer finance market has a “golden” opportunity for development with ideal conditions, such as a developing economy, a 95-million-strong population, 52 per cent of whom are of working age, and increasing incomes, as well as a marked shift from saving to shopping and from cash to consumer credit.

The development of consumer finance is motivation for the growth of the economy, accelerating the rotation of goods on the market, allowing people to approach credit services, especially the customer groups under the banks’ standard of lending, restricting black market credit, and supporting low-income people to improve their life.

Nguyen Tu Anh, deputy head of the Monetary Policies Department at the State Bank of Vietnam, said that the proportion of consumer value in Vietnam’s GDP is increasingly high. Consumer credit has increased five-fold over the last five years.

While in 2012 total outstanding consumer loans were around VND230 trillion ($10.1 billion), making up 8 per cent of the economy’s total outstanding loans, it hit approximately VND1.1 quadrillion ($48.5 billion) in 2017, 4.8 times higher than in 2012 and 17 per cent of the total outstanding loans.

Panelists at the workshop

According to Can Van Luc, lead economist of BIDV, consumer finance has significantly contributed to socioeconomic development. Especially, the establishment of finance companies has enabled people to further approach capital from official channels. A total of 30 million clients have been served by these finance companies. Besides, these companies have also created around 40,000 jobs, contributed to poverty reduction.

The booming emergence of consumer finance in Vietnam has sent the demand for capital of finance companies to soar. Different from banks, finance companies are not allowed to mobilise deposits from people, so capital supply mainly comes from credit organisations. This is really a big challenge for finance companies.