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Consumer lending market has much room for growth

Tu Hoang
Friday,  Apr 28,2017,00:26 (GMT+7)
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Consumer lending market has much room for growth

Tu Hoang

HANOI – The consumer finance market still has much room for growth in Vietnam in the coming time, according to a study of the Institute of Business Administration under the University of Economics and Business.

Consumer loans account for 5% to 10% of total outstanding loans in Vietnam, compared to around 40-50% in developed nations, said Hoang Van Hai, dean of the institute, at a seminar on the domestic consumer lending market in Hanoi on Tuesday.

“Our consumer lending market potential remains huge given the modest number of credit organizations and their products, as well as the low proportion of consumer credit,” said Hai, adding the informal credit market still exists and attracts a good number of participants.

The report indicates local banks dominate 87% of the formal consumer lending market, followed by financial firms with 12%, and fintech firms with a mere 1%.

The study’s author Nguyen Thuy Dung said the estimate has excluded informal lending channels, as well as lending by social agencies and organizations.

Dung added domestic consumer loans are flexible, owing to simple filing procedures and quick disbursements. Notably, the growth of loan models like those of Viet Phu Payment Services Support Corp. and F88 Investment Joint Stock Co. has been robust in recent times. However, loans for the education and healthcare sectors have yet to exist.

“There have been major changes in consumer habits and strong demand for credit among middle-income earners,” she said.

Ho Chi Dung, head of the institute’s marketing department, explained young people are more confident nowadays, so they may be willing to take out loans for spending needs. Besides, some have been independent since younger ages, so they have more shopping needs.

However, a recent survey shows that a large proportion of interviewees are inclined to borrow from relatives. In addition, nearly 99% of respondents perceive commercial banks as a reliable source of consumer loans, with 66% of them willing to borrow from them. Meanwhile, 93% have heard of financial institutions, but only 33% are prepared to borrow from such concerns.

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