Dang Ngoc Duc - Former dean, School of Banking and Finance National Economics University
In order to stimulate development of consumer finance, it is necessary to disburse the VND62 trillion ($2.69 billion) financial support package for poor people and businesses affected by COVID-19 in collaboration with the VND16.2 trillion ($704.3 million) package from the Vietnam Bank for Social Policies without interest to help the business community.
In addition, local authorities need to simplify procedures for loans. Commercial banks and credit organisations should build small consumer loans with low interest and extend time for paying debt. Furthermore, it is necessary to educate people, especially workers and students, about the benefit of consumer loans.
Especially, authorities need to manage the pawn and usury services, and investigate and destroy ghost companies’ applications offering illegal loans.
Truong Thanh Duc - Chairman, BASICO law firm
Local consumer finance, despite being promising, is still lacking legal frameworks, especially codes related to consumerism. Figuring consumer finance as banks is inappropriate as consumer finance companies are not allowed to mobilise capitals from citizens. That is one of the main reasons behind operating concerns.
Lending money at an exorbitant high interest rate is still effective thanks to being able to get around the rules. Indeed, the demand for consumer lending is largely reflected by the evolution of usury in Vietnam (lending money at unreasonably high rates of interest). However, if consumer finance companies can meet the need of customers, this will not be an obstacle for local consumer finance.
Handling usury activities is a great burden because usurers are commonly very good at circumvention. For instance, the interest rate outlined in a recent paper does not exceed 20 per cent, but the other kinds of interest are separated under many forms.
Tran Thanh Nu Tuong Vy - Deputy general director, SHB Finance
New development orientations will be shaped in the upcoming time, providing the opportunities for consumer finance companies to restructure operations are aligned with new models, and as long benefits of digital technology are taken advantage of in order to save costs and match new consumer lending trends.
At SHB Finance, right from inception the company built up a solid operation apparatus that operates under direct guidance from parent bank SHB.
Currently the Credit Information Centre (CIC) works on collecting, storing, analysing, processing, and forecasting credit information of individuals and organisations serving the operation of banks and credit institutions. The application of big data proves vital for finance firms to have much data for the process of evaluating and approving customer records.
If the CIC is updated with the more data showing consumer payment behaviours such as information about social insurance, taxes, or bill payments, it will be very useful for the operation of consumer finance firms, helping them to minimise bad debts on the part of retail customers.
Can Van Luc - Senior finance expert
The protracted pandemic has put many customers into insolvency, posing growing default threat to the economy which has seen initial signs in China.
As consumer finance firms are unable to raise capital from individuals, their finance comes from diverse sources such as through bond issuances or foreign loans. This reliance contains latent risks to refinancing due to uncertainties of the financial system. This kind of risk, however, is insignificant in Vietnam as current ratio of consumer lending on the total outstanding balances is still low at about 12.3 per cent (in 2019) compared to that in other countries.
A recent survey by market research firm Nielsen points to a decline in consumer spending in the first quarter this year with nearly 70 per cent of consumer giving priority to saving. The trend of increased spending on food with reductions in other segments is forecast to hold on, even post-pandemic.
These factors would strongly affect retail consumer trend in many years to come, reshaping the way consumers choose their products, thus prompting the need for consumer finance companies to revise their operation and business strategy to match the situation.
Swaroop Shah - CEO, Validus Vietnam
Vietnam’s growing economy is opening up many opportunities for foreign players, particularly in the consumer finance as well as fintech space. Existing gaps in financial inclusion will also pave the way for further potentials.
However, foreign enterprises may also likely face many challenges stemming from differences in cultural nuances and lack of familiarity to the local regulatory framework.
Our view is that any fintechs or consumer finance firms entering the market should do so responsibly and within a framework of good governance, as this will be key to building and gaining consumers’ trust in digital platforms.
We look forward to a clearer regulatory framework as that will ensure sustainable and responsible growth of the industry.
Kim Jong-Geuk - General director, LOTTE Finance
To companies newly entering the market within the last few years, especially foreign-invested ones, the implementation of measures in response to the new regulations will become more challenging.
This is because some of these companies do not have a big customer base and are not backed by any commercial bank.
Many reports on Vietnam’s consumer finance market reveal that cash loans are the most competitive product differentiating financial companies from banks.
The durable loan – especially for electric equipment consumption – goes to the saturation phase while credit card services of finance companies find it hard to compete with those of banks.
Therefore, most of these companies focus on direct disbursment loans, investing significantly on IT infrastructure systems compatible with this mainstream product during the market penetration stage.
An immediate system renovation and restructure in the early strategic years to suit the new product portfolio will put much more pressure on these brand new financial companies.