Finance leasing a pressing question

Finance leasing was a non-bank medium and long-term sort of credit well matching demands from firms since it does not require collateral, according to Vietnam Financial Leasing Association (VFLA) general secretary Dam Duc Long.

However, after a decade coming into existence financial leasing firms in Vietnam have now been underperformed with continually declining market shares. Non-performing debts at financial leasing firms currently occupy 40-50 per cent of their total outstanding loans, according to National Financial Supervisory Council (NFSC) figures.

“Financial leasing firms face a one-sided competition from commercial banks while they were yet to find out suitable market segments. Besides, relevant legal framework remains unsafe to their operations,” said NFSC’s chairman Vu Viet Ngoan.

Diversifying non-bank credit institutions to relieve commercial bank system burdens is reportedly a central bank’s future development orientation.  Financial leasing firms have proven to well match demands from businesses in the country.

Financial experts, however, assumed current legal framework and mechanisms were tumbling blocks to financial leasing services development in Vietnam.

Some problems then need to be ironed out to ensure the healthy performance of financial leasing firms in the coming period.

First, the State Bank should present a conductive capital mobilising scheme to favour financial leasing firms.

Second, it is important to strengthen governance capacity and scale up checks at financial leasing firms. Staff at these firms must strictly abide to customer appraisal process before giving any leasing decisions.

Finally, there needs to be closer regulations shielding the right to reclaim leased assets of financial leasing firms since in fact a number of firms leasing assets from financial leasing firms then sold or re-leased these assets to other firms and it took much time and efforts for financial leasing firms to later procure their assets.