The total outstanding consumer loan in Vietnam has expanded approximately 20 per cent a year on average over the past seven years, according to the Banking Strategy Institute. The growth was 31.49 per cent in the first nine months of this year.
The consumer loan to GDP ratio was 6.4 per cent; the consumer credit to total credit ratio was 5.6 per cent; consumer loan to end consumer ratio was 7.3 per cent last; and consumer loan per capita was approximately VND1.5 million. There is still vast room for consumer loans to develop.
According to the State Bank of Vietnam (SBV), consumer credit to total outstanding credit loans in the economy rose from 6.31 per cent in September 2014 to 8.02 per cent in September 2015. Given the outstanding credit loan in the economy in September 2015, consumer credit valued approximately VND357 trillion. This scale was roughly equivalent to real estate investment and business loans at the same time.
The economy has shown many positive signs, inflation was brought under control, and consumer confidence improved. This will create growth momentum for short-term and medium-term consumer credit. According to the World Bank (WB) in Vietnam, only a third of population has bank accounts and banking demands tend to rise as rising living standards are improved. About 15.8 million people are currently potential customers given their satisfaction of basic conditions of age and income. These are reasons to believe that consumer credit will boom in the future.
Vietnamese people’s demand for consumer credit is growing, especially when the economy is recovering. Therefore, not only independent financial companies but banks have pushed up the formation of affiliated financial companies. Financial companies are playing a dominant role in providing loans worth less than VND100 million. Simple borrowing procedures, plus no security assets being required, are inciting low-income consumers with high demand for non-security credits.
Customers only need to show the evidence of full-time paid employment at registered companies or agencies to access loans to buy wedding supplies, motorcycles and household devices or even cars or houses.
When the economy is better, the credit growth may be more impressive. Bad debt risk management is very important. Bad debt control always depends on strict risk management mechanism. If lenders vie for market share and make light of risk control, personal financial credit may form a “bubble” and operating bad debts will increase as a result. Therefore, bad debt risk management is very important.
Consumer credit risk also latently lies in high interest rates as interest burdens on customers may lead to increased risks. Financial companies usually impose an interest rate of 39 - 49 per cent per annum, many times higher than that at commercial banks. Dr. Le Xuan Nghia, former Vice Chairman of the National Financial Supervisory Commission, said, an interest rate of 50 per cent per annum is extremely high. The central bank needs to manage lending activity closely and transparently to facilitate consumers without security assets to access financial companies when they are disqualified for borrowing money from commercial banks.
Bao Chau
Vietnamese
