New policy drafted to help non-bank credit institutions develop further

A customer uses a consumer finance lending service to buy products at a supermarket in Hà Nội. — Photo tinnhanhchungkhoan.vn

HÀ NỘI — The State Bank of Vietnam (SBV) has finalised a draft circular to help non-bank credit institutions, including financial companies, further expand and develop.

According to the SBV, some non-bank credit institutions have encountered difficulties and obstacles in their operations, partly due to limitations in their scope of operations. As a result, they requested that the SBV convert their types from specialised financial companies to general financial companies. Therefore, it is necessary to develop a new regulation to allow the conversion to facilitate the development and expansion of the companies’ scope of operations.

Under the draft circular, the SBV proposes that credit institutions are reorganised in the form of converting non-bank credit institutions, after receiving written approval from the SBV.

The draft circular regulates filings, procedures and steps for granting establishment and operation licences to credit institutions in cases that commercial banks contribute capital or purchase shares of credit institutions, which causes a change in the legal form of credit institutions. The SBV will grant the establishment and operation licences to credit institutions in the cases.

According to financial and business information service company FiinGroup, finance companies saw pre-tax profits plunge by VNĐ3.62 trillion last year, continuing a downward trend which started post pandemic in 2020. However, they are entering a new growth cycle.

According to FiinGroup’s analysts, lending of consumer financial companies is gradually improving. For example, following restructuring in business operations to optimise operating costs and strengthen risk control, FE Credit, which is the consumer finance company with the largest market share in Việt Nam, posted a profit of nearly VNĐ300 billion in the third quarter of 2024.

The analysts believe that consumer finance companies will promote caution in disbursement activities with an aim for a sustainable growth this year, instead of the overheated growth seen in past years.

According to FiinGroup, despite the challenges, Việt Nam's consumer finance market remains highly promising in the long term, driven by low penetration rates and favourable demographics.

Sharing the same view, Nguyễn Đức Vinh, general director of VPBank (FE Credit's parent bank) said, though Việt Nam has 16 consumer finance companies licensed by the SBV, they still do not fully meet the market's needs. Therefore, Việt Nam is potentially a lucrative market for consumer finance.

In Việt Nam, the consumer credit scale is only just over 10 per cent of GDP, much lower than that of many other countries and territories, such as South Korea with more than 40 per cent of GDP and Hong Kong (China) with more than 20 per cent of GDP.