Vietnam promising land for consumer finance in-2013

December 31 2012


Consumer finance services have been available in Vietnam over the last 10 years. The market got warmer in 2007 when a series of foreign consumer finance firms turned up in Vietnam. However, the retail finance service sector still has not fully developed, which means great opportunities are still available for investors.

Stox Plus, a prestigious finance analysis firm in Vietnam, has released a report which says that the Vietnamese market has great potential and that it would see a boom in consumer finance in 2013.

Commenting about the operation of Vietnamese commercial banks, Stox Plus believes that they would not focus on lending to businesses as they have been doing so far, but they would also consider providing retail banking services. This means that individual consumer finance would be the choice of many banks.

Of course, the Vietnamese promising market would be the destination of foreign finance institutions which would make a presence in Vietnam through the merger and acquisition deals or cooperation with existing firms.

In fact, the individual consumer finance market took shape in 1990s, when the banking products were provided by commercial banks as a part of retail banking services.

However, the market has not developed until recent months, when commercial banks found it very difficult to push lending to businesses, which have met big difficulties in the economic downturn and don’t intend to expand business. This has forced banks to think of pushing up consumer credit to offset the decreases in the outstanding loans provided to businesses.

The banks have recently realized that the lending to individuals has shown better growth, while the non-performing loan ratio is much lower than the lending to businesses.

The report of Stox Plus said that a lot of rural banks have developed into urban banks with the bigger scale of operation, but they still have the branches in rural areas which allow them to reach out to different localities across the country. Kien Long Bank, for example, has developed individual consumer finance at a small scale.

Bigger banks have jumped on the bandwagon. Techcombank, VP Bank, ACB and Sacombank are some of them.

However, analysts believe that great potentials are still awaiting other banks as well. Vietnam has the population of 90 million people with a high percentage of young population, the subject to individual consumer finance services.

Meanwhile, the average income of 51 percent of the population, who are at the “golden age,” has been improving considerably. This would help make the “borrow-to-buy” concept more popular among Vietnamese people.

Besides the foreign invested financial institutions, Vietnam has 12 state owned finance companies established in late 1990s. However, the companies, which are the subsidiaries of commercial banks, have been mainly serving the operation of the parent groups, while only several institutions have been providing loans to individuals.

The economic growth rate and government’s policies are a part of the story about the consumer finance development, which explains why consumer credit has not been interested yet.

Currently, the consumer finance services have also been provided by a lot of companies which join the market unofficially.

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