Statistics from the State Bank of Vietnam show that consumer credit activities in Vietnam have grown significantly in recent years in terms of outstanding loan balances, the number of credit institutions participating, and the diversity of products and services offered.
Currently, the total outstanding loans for life and consumer purposes in Vietnam have reached approximately 2.8 quadrillion VND, equivalent to 20% of the total outstanding credit of the entire economy, becoming an important part of the credit structure of the credit institutions’ system.
The economy is forecast to continue positive growth, and Vietnam’s consumer finance market is also expected to prosper. These expectations are largely driven by recent policy changes and improvements, such as the State Bank of Vietnam recently issued Circular No. 12/2024/TT-NHNN, which amends and supplements certain provisions of Circular No. 39/2016/TT-NHNN, regulating the lending activities of credit institutions and foreign bank branches to customers.
The new points in the policy promote stronger participation from commercial banks in consumer lending activities, thereby promptly and fully meeting the legitimate borrowing needs of the population. One new provision in the circular allows credit institutions to lend amounts under 100 million VND without requiring customers to provide a viable plan for using the funds.
Instead, customers only need to provide basic information about the fund’s legal use and financial capacity before the credit institution grants the loan. These changes are expected to help customers, especially those in remote areas or with low incomes, access small loans more easily and conveniently.
Additionally, a report from FiinGroup shows that the consumer finance market is entering a new growth cycle. The market recovery will become more apparent in the second half of 2024. In the short term, the recovery will be supported by positive signs from the macroeconomic environment, including the recovery of manufacturing and export sectors, as well as the quality of credit and the demand for credit from workers and low- to middle-income earners who are the main customer base in consumer lending. The digitalisation of the customer journey, improvements in customer experience, and increasing customer retention rates will also play a role.
However, despite many recovery signals, the consumer finance market faces numerous challenges, especially as bad debt trends increase in credit institutions. The bad debt situation in the consumer lending sector remains a concern. Recently, groups have emerged on social media, encouraging and teaching others how to evade debt and delay payments. Although lenders and regulatory agencies have implemented measures, debt recovery for this customer segment faces many difficulties and challenges. Therefore, significant changes are needed for the consumer finance market to truly recover and achieve sustainable growth, particularly in improving the legal environment, especially regulations guiding debt recovery.
In addition to being transparent in debt collection activities and lending costs, lending institutions also need to implement measures to check and monitor the use of borrowed funds according to the purposes committed and the repayment capacity of customers. This will help credit institutions limit bad debt, ensuring full and timely recovery of principal and interest as agreed. Moreover, borrowers must be aware of responsible consumption and timely debt repayment.
