In order to deal with the economic downturn, the banking and financial sector has applied many strategic measures including consumer lending, which is considered as a “hot” policy representing huge banks’ determination to heat the frozen economy.
Opening mechanism
On January 23 2009, vice governor of the central bank Nguyen Dong Tien signed the Circular No. 01/2009/TT-NHNN to allow credit institutions and their customers to negotiate interest rates on credit cards. The mechanism created conditions for many banks to resume and promote their consumer lending. Accordingly, since early February 2009, lots of commercial banks have officially announced to develop some consumer lending products with diverse terms. Almost consumer lending products focus on credit consumer lending or lending to serve individual needs like buying house, car, with terms from VND200 million to VND500 million.
Several banks estimated to lend lending products worth of VND2-3 trillion this year. The lending interest rate sets at 11 per cent per year at least and from 13 per cent to 15 per cent per year in common.
In fact, consumer lending is a most profitable business for most credit institutions. They have provided such kind of credit for 10 years but the market have only buoyed up in the latest two years when foreign commercial banks and financial companies joined the market.
Consumer credit comes in many forms like partial lending or overdraft. The lending value can be up to 100 per cent of the to-be-bought asset.
Open but still difficult
In 2007, consumer lending was seen a boom as insecurity lending for corporate executives reached VND200 - 300 million. After nearly one year, consumer lending was tightened because of lack of liquidity and ceiling interest rate regime. This year, LienVietBank boasted a record insecurity credit lending of VND500 million for company’s workers. The maximum maturity is 36 months.
Nguyen Duc Huong, General Director of LienVietBank, said: Although insecurity credit lending poses a lot of risks, with clear regulations and tight management, this is a very promising market for financial companies and banks. He added the consumer lending also means speeding up demand stimulus, a major objective of LienVietBank in 2009.
Habubank said it would spare VND2,000 billion for consumer lending. The bank will present an insurance policy with indemnity of at most VND800 million. Asia Commercial Bank (ACB) announced to loan VND2,000 billion for customers to expand business and buy houses, repair houses. VPBank also committed the same amount for consumer lending. An official from VPBank said his bank will carefully check loans and prioritise safe funding. Besides, many banks like Techcombank, DongAbank and Eximbank are also actively advancing consumer lending by joining hands with shopping centres.
Many banks are opening its credit to individuals. However, according experts, the average lending amount is VND921,000 per person, a small sum in a country with 86.5 million people and high growth rate like Vietnam.
Nonetheless, consumer lending by commercial banks had to be stopped to focus on addressing inflation and keeping the credit growth of 30 per cent downwards. Banks lack individual, household and small business database because the State Bank of Vietnam’s Credit Information Centre (CIC) only provided corporate information. Therefore, banks lack ground to assess the safety and risks of their loans.
Thi Van
Vietnamese
