Representatives from local banks convened in a meeting yesterday to discuss the debut of a private credit information center in the country to meet the increasing demand for sharing credit information in the field, local media reported.
During the meeting, all of the participants from more than 100 local banks agreed on the important role such a center plays in fostering economic growth.
Experts said, the private help center will assist banks access the risks of issuing a loan based on a borrower’s credit history.
According to Adam Sack, general manager of the International Finance Corporation (IFC), the co-organizer of the meeting, small and medium-sized enterprises (SMEs) in Vietnam have to deal with a lot of difficulties in accessing the long-term funds they need to develop their businesses due to a lack of sufficient collateral.
To date, the demand for credit information exceeds the available resources that can supply information of this kind.
The Credit Information Center (CIC), which operates under the State Bank of Vietnam (SBV) is the only credit information resource in Vietnam.
CIC reported around 70,000 orders from customers last year, of the total, nearly 90 per cent of the orders were for credit information. “We failed to satisfy the order”, said Pham Cong Uan, deputy director of the CIC.
A World Bank survey of over 5,000 businesses conducted worldwide in 2003 indicates that with the establishment of a credit center, small business facing difficulty receiving financial assistance from banks fell from 49 per cent to 27 per cent, and the profitability of SMEs accessing credit rose from 28 per cent to 40 per cent.
Vietnam’s existing public credit registry collects information on large loans from banks, but does not have the resources to cover smaller SMEs, consumer loans, and other credit providers such as utilities and insurance companies.
It is estimated only 1.1 per cent of adults in Vietnam have an existing credit report with the public credit registry, compared with 18.4 per cent in Thailand, where a private credit center have operated since 2002. In Australia, the entire adult population has an existing credit report.
The World Bank Group’ annual report Doing Business 2005, which compares the quality of the business environment in over 150 countries around the world, indicates that establishing a private credit system is one of the three reforms Vietnam should undertake.
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