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Consumer finance market underdeveloped
Tu Hoang
Friday,  Sep 29, 2017,17:59 (GMT+7)

Consumer finance market underdeveloped

Tu Hoang

HANOI – The local consumer credit market remains underdeveloped despite high consumer demand while the black market still attracts a large number of people in need.

At a seminar on consumer lending held by the Institute of Business Administration under the University of Economics and Business in Hanoi City on Wednesday, Hoang Van Hai, head of institute, said consumer loans account for a mere 5-10% of total outstanding loans, compared to 40-50% in developed nations. In addition, the number of credit institutions catering to consumers is small.

According to a survey of the institute with 2,000 respondents in 12 provinces and cities, 62% of them have never taken out consumer loans as they worry about indebtedness and stringent lending requirements. Some 53% of them will ask for consumer loans in case of absolute necessity.

However, 48% of respondents, mainly young people who have never taken out consumer loans before, are willing to borrow if necessary.

The survey shows that there are currently more than ten consumer loan lenders with minimum chartered capital of VND500 billion (US$21.81 million) each, in which, FE Credit is the leader with the largest capital of VND2.79 trillion.

At present, FE Credit holds a market share of more than 48%, followed by Home Credit with nearly 16%, HD Saison with 12%, JACCS with 2% and Mirae Asset Finance with 1%.

Most clients are satisfied with lending services and procedures but they are displeased with the high lending rates.

A representative of the State Bank of Vietnam admitted that the consumer lending market still faces numerous obstacles despite huge demand.

The central bank wants the market to develop safely and moderately so that local people will be not affected by potential risks.

Truong Thanh Duc, chairman of Basico law firm, said the legal system has not facilitated the development of the service.

Finance firms may face higher risks than commercial banks in recovering debts as this kind of loan does not require collateral. Besides, the legal system is insufficient to deal with violations.

However, the sector holds high growth potential as consumer loans are suitable to modern life and help ease concerns of consumers.

The survey also shows that consumers ask for loans for a vast range of purposes. Household businesses tend to get consumer loans to increase investments, farmers to pay for healthcare services and household appliances, students to buy personal appliances or to travel, and officials to pay for healthcare, entertainment, tourism, beauty care and education.

Le Xuan Sang, deputy director of the Vietnam Institute of Economics, said Vietnam has huge demand for consumer credit thanks to the young population whose consumer spending makes up 75% of gross domestic product (GDP).

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