HTH, a victim of black credit

A victim of black credit, HTH, 27, in Binh Thuan province, was brought to hospital in early December 2018 in a dangerous state. The woman had tried to commit suicide by drinking a pesticide. 

She had borrowed VND10 million from a man named Trong at an exorbitant interest rate of 30 percent per day. She needed the money to upgrade her hairdresser’s shop. However, H could not pay the debt on schedule. With the sky-high interest rate, the amount of money H had to pay was much higher than the principal. She could not find any solution to her problem.

H is not the only victim of ‘black credit’, which exists in both large cities and rural areas.

SBV, in an effort to stop black credit, has launched a credit package of VND5 trillion. Agribank, in charge of disbursing the credit package, will provide loans to people like H, without requiring collateral.

As per SBV’s request, Agribank will have to approve proposals for loans within one day. One can borrow up to VND30 million at reasonable interest rates.

Cao Sy Kiem, former Governor of the State Bank, said the credit package would be very useful to the poor, who cannot access bank loans because of the lack of mortgaged assets and complicated procedures.

“In general, poor people don’t have qualifications and financial capability to satisfy the requirements set by banks. If the requirements are eliminated, they will have more opportunities for official loan access,” Kiem explained. 

Under the VND5 trillion credit program, borrowers just need to show their identity cards or ask for loans via local authorities. 

However, Kiem pointed out that the amount of VND5 trillion is ‘too small if compared with peoples’ needs’. If Agribank cannot manage the program, the money will be used for the wrong purposes.

The money may not reach the people who need capital, but fall into the hands of the wrong groups of people. Kiem also warned that bank officers may work with usurers, thus limiting access to the poor.

An analyst warned that the credit program may affect lending to the national economy.

“SBV has declared war against black credit, using loans as a weapon. The credit growth rate in 2019 is expected not to exceed 15 percent for the entire economy,” he said.

Kiem said banks could increase the number of loans with low interest rates and restrict loans to huge high-cost projects that do not offer essential benefits to the public.

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