In the document directing the implementation of the plan for the last six months of the year, the Governor of the State Bank of Vietnam (SBV) asked credit institutions, especially consumer finance companies and Vietnam Bank for Agriculture and Rural Development (Agribank), to promote consumer credit packages to serve the needs of the people, with reasonable interest rates, simple procedures and under the law. At the same time, Vietnam Bank for Social Policies (VBSP) must urgently complete the pilot plan to expand consumer credit.
According to economic experts, boosting consumer loans, thereby stimulating consumer demand was one of the three current economic growth drivers. When production credit was hard to grow, many banks had relied on consumer credit for growth.
At the meeting with investors in early August 2020, Vietnam Technological and Commercial Joint-Stock Bank (Techcombank) leaders affirmed that in the near future, the bank determined that real estate and personal lending was still the focus. In which, home loan accounted for 44 percent of the retail debt structure.
Not only Techcombank, from the beginning of the year until then, many banks had also promoted consumer credit growth, especially buying houses, buying cars, electronic products. Can Van Luc, Chief Economist of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), said that during the economic recovery period, consumer credit would contribute to stimulating aggregate demand and supporting growth. Besides, the demand for loans of people was still huge today, and shadow banking had signs of rapid increase. Therefore, developing consumer credit would limit and repel shadow banking.
However, promoting consumer lending was not easy. By the end of July 2020, the credit of the whole system increased by 3.45%, less than half of the same period last year. Nguyen Quoc Hung, director of Credit Department (SBV), said that consumer credit and personal loans grew even more slowly. In the next time, SBV would continue to encourage the promotion of consumer loans, but how much the growth would be depended on the absorption capacity of the economy. Currently, people’s demand for consumer loans was fragile in the context of unstable jobs and declining income due to the epidemic. However, banks and finance companies could not lend without guilt, otherwise, bad debt would increase very quickly, Hung said.
Although considered as a driving force to stimulate economic growth and a rare exit of banks and finance companies in the current context, consumer credit also had many potential risks. Therefore, even the consumer finance companies did not dare to risk to promote disbursement at all costs at this time.
Kalidas Ghose, general director of FE Credit, admitted that the Covid-19 outbreak had a devastating impact on consumer lending. As of the end of June 2020, FE Credit’s credit growth decreased slightly compared to the end of 2019. The lending slowdown was not only due to weak customer demand, but also financial companies themselves because of bad debt concerns. The company focused on selling to existing customers to limit risks and promote credit card lending. Hopefully, disbursement revenue would increase slightly in the second half of the year thanks to owning a large number of existing customers. FE Credit was also trying to launch a new application, diversify the ecosystem, thereby increasing the proportion of using FE Credit in the client’s wallet, expected the general manager of FE Credit.
The separate and consolidated financial statements of some banks, such as Military Commercial Joint Stock Bank (MB MBBank), and HCM City Development Joint Stock Commercial Bank (HDBank), also showed that credit growth of affiliated consumer finance companies was much slower than last year.
In addition to promoting sales via digital channels or boosting credit cards, some banks were making efforts to utilise their ecosystems to promote consumer lending. For example, HDBank had an ecosystem like HDBank Vietjet Air HD Saison, Techcombank had the ecosystem of Techcombank Vingroup Masan.
However, only the efforts of banks and finance companies to give loans were not enough to boost consumer credit. Vo Tri Thanh, a member of the National Financial and Monetary Policy Advisory Council, said that in order to stimulate consumer lending effectively, the coordination of many policies was necessary. Stimulating consumer loans must be associated with ensuring jobs and income for employees, at the same time, it was essential to introduce loan packages to buy social housing, promote digital transformation, accelerate the implementation of welfare packages, and so on. Banks, finance companies also had to understand consumers better, to evaluate the current people’s borrowing habits for consumption, Thanh recommended.
