Experts optimistic about consumer finance industry

Consumer credit is expected to grow strongly in Vietnam thanks to the many advantages the country possesses, economists have said.

Senior financial expert Can Van Luc told Dau Tu (Vietnam Investment Review) that Vietnam's consumer financial services industry has great potential. Consumer lending accounts for just 6 percent of total outstanding loans in Vietnam compared to 15-20 percent in many countries and as high as 35-40 percent in the US, he added.

The most common forms of consumer credit include credit cards, auto finance, personal loans, consumer lines of credit, retail loans, and mortgages.

Photo for illustration. Photo: dantri.com.vn

Economist Dr. Nguyen Minh Phong agreed with Luc saying the country has a population of 93 million, which is expected to top 100 million by 2025, with the majority being young people.

"This is a big advantage for the development of the consumer financial services industry."

Vietnam's economy is growing steadily and the country has economic agreements with many developed economies, he said.

"When the economy develops it results in lower unemployment and improved incomes, resulting in increased consumer demand, thus creating opportunities for consumer lending."

Another expert, who asked not to be named, said the Government's efforts at administrative and tax reforms together with political stability has encouraged both foreign and domestic businesses to invest in various industries, including consumer finance.

Banks have focused on consumer lending in recent years, and as a result, in the last seven years, credit has been growing at nearly 20 percent a year, according to the Banking Strategy Institute.

The borrowers are mainly low-income earners who do not have assets to mortgage.

The average value of consumer loans has increased rapidly from a few million dongs to dozens of hundreds of million dongs.

Analysts said this has meant a consumption-driven stimulation of the economy.

Dr Nguyen Thi Kim Thanh, a former director of the Banking Strategy Institute, said consumer lending is carefully monitored to protect borrowers and ensure healthy development of the market.

But it is necessary to strengthen the legal framework to enable banks and financial companies to operate in line with international rules but also keep in mind the situation in the country.

"Credit institutions also need to improve… transparency in their lending activities to provide products that meet customers' demand as well as suit their pockets.

"If we can do these things the consumer financial services industry will be able to develop to its full potential."