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‘Inevitable’ growth of Vietnam’s consumer lending market attracts newcomers

An employee counting money at a bank in Hanoi.
An employee counting money at a bank in Hanoi.

The great growth potential seen in Vietnam’s consumer lending market is attracting increasing numbers of newcomers.
Early this month, EVN Finance, a subsidiary of national power utility, Vietnam Electricity, launched a consumer lending program called Easy Credit in Ho Chi Minh City.

Customers with a monthly minimum income of VND4.5 million ($194) in five southern localities – Ho Chi Minh City, Dong Nai, Binh Duong, Long An and Vung Tau – are eligible to borrow cash from the program.

Eligible customers can take loans of VND10-90 million ($432-3,882) with payback periods of 6-60 months.

EVN Finance is one of many finance institutions looking to cash in on the growth in consumer lending, which had a value of over $5 billion at the end of last year, according to the National Financial Supervisory Commission (NFSC).

SHB Finance and VietCredit Finance Company have also introduced similar credit schemes.

Some banks and foreign investors have announced plans to set up consumer finance divisions to increase their market shares in the sector.

Orient Commercial Bank (OCB) is planning to set up a subsidiary with a capital of around VND500 billion ($21.7 million) or acquire an existing finance company in the market.

In June, SeABank acquired the subsidiary of Vietnam Posts and Telecommunications Group (VNPT), Posts and Telecommunications Finance Company, for VND710 billion ($30.87 million).

In addition to the Vietnamese banks, foreign investors are also eyeing this market. Early this year, Korea’s Shinhan Financial Group bought Prudential’s consumer finance unit for $151 million.

Industry insiders say more companies are coming in because of increasing demand in Vietnam for consumer lending services. NFSC statistics show consumer lending surged 50.2 percent and 65 percent in 2016 and 2017, respectively.

The commission attributed the surge to a high demand for housing, arising from a young population and increasing urbanization.

Kalidas Ghose, CEO of financial firm FE Credit, said that while consumer lending has developed rapidly in recent years, the market has vast room to grow.

He said the potential for exploiting the market is still large since consumer lending is an inevitable trend across the globe.

The share of consumer lending in Vietnam’s total outstanding loans is only about 11.4 percent, while the figure in developed countries is between 40-50 percent, Ghose added.