Consumer credit growth rate slows

The two biggest consumer finance companies have reported growth rates of less than 5 percent for the first half of the year, a modest figure compared with two-digit growth rates seen in previous years.

The figure of 5 percent is less than half of the growth rate of the entire banking system, and is equal to one-third of the growth rates of holding banks.

FE Credit, which made up 50 percent of combined profits of VP Bank in previous years, brought less than 40 percent of profits in the first half of 2018.

The finance company with the largest market share saw outstanding loans increasing by 3 percent only in the first six months, while the combined credit growth rate reached 8.8 percent for VP Bank.

HD Saison, the second largest consumer lender, where HD Bank holds 50 percent of shares, is in the same situation. While HD Bank, the holding bank, had credit growth rate of 16 percent, and HD Saison less than 5 percent.

“The cited figures show that the consumer credit growth rate continued to be weak in the second quarter,” said the Ban Viet Securities (VCSC) report.

As for FE Credit, in mid-2018, the company had a crisis with borrowers related to DeAura, a beauty care service provider. DeAura was denounced for forcing customers, including low-income earners who have poor understanding about consumer credit, to buy products and turn them into debt 

FE Credit’s CEO Kalidas Ghose confirmed that one of the reasons behind the decline in business is the re-organizing of consumer lending activities. FE Credit has met with complaints from clients about the unfairness in collecting debt, and has had to adjust some criteria.

CEO of VP Bank Nguyen Duc Vinh, at a recent press conference, admitted that FE Credit is slowing down. However, he said that this is in line with the bank’s strategy on strengthening inner development rather than focusing on rapid growth.

The common problem that consumer finance companies face is the settling of bad debts.

According to FE Credit, as more and more banks develop consumer finance service, they face a worker shortage.

FE Credit’s CEO complained at a press conference that the company lacks workers in charge of debt collection. 

“We lost many workers earlier this year to the hands of our rivals. As a result, the amount of debts each debt collector is responsible for has increased rapidly,” he said.

RELATED NEWS

Consumer credit: hundreds of lenders, thousands of debtors

P2P lending feared to trigger black credit