2020 may become a ‘nightmare’ for many consumer finance companies, which could see their profits drop sharply because of new regulations and the effects of COVID-19.

The central bank believes that the consumer finance market in Vietnam is still in an early development stage, and needs to be controlled strictly by risk management tools.

Consumer credit has grown by five times in the last five years, according to the State Bank of Vietnam.

VietNamNet Bridge - More foreign investors are attempting to take over Vietnam’s finance companies, which are in a ‘golden development stage’.

VietNamNet Bridge - With a population of 95 million and a high percentage of young people of working age, Vietnam is now in the ‘golden period’ to develop consumer credit.

VietNamNet Bridge - Vietnamese are increasingly borrowing money to spend on consumer goods as consumer loans had reached $5 billion by the end of 2017.

VietNamNet Bridge - Experts say the legal framework for consumer financing is still not open enough, creating difficulties in attracting foreign capital.

VietNamNet Bridge - Reports all show steady growth in consumer lending in recent years and increased expansion of finance companies.

VietNamNet Bridge - The increased presence of foreign investors in M&A deals of finance companies shows the attractiveness of the consumer credit market.

Together with high profits of trillions of VND at the end of 2017, domestic commercial banks reportedly hired thousands of employees to boost their performances and seize new opportunities.

The Vietnamese consumer finance market at VND646 trillion, or $28 billion in 2016, was equal to 10 percent of GDP.

Consumer credit soared by 65 percent in 2017, accounting for an increasingly high proportion of total outstanding loans, according to a report from the National Financial Supervision Council (NFSC).

VietNamNet Bridge - More than half of the purchases of premium smartphones (costing more than VND10 million) are paid by installment plans.  

VietNamNet Bridge - Around one out of every two Vietnamese borrows money on credit, according to StoxPlus. 

The appearance of big foreign retail chains and the strong rise of Vietnamese chains have fostered the development of consumer credit in Vietnam, according to the State Bank of Vietnam. 

VietNamNet Bridge - Many M&A deals between banks and finance companies have been reported recently. 

Despite the successive interest rate reductions, the interest rates in Vietnam are still the highest in the region.

The biggest obstacle for finance institutions to expand consumer finance services is the government’s policy which does not give support to the sector.

Experts believe that consumer finance would witness a boom in 2013, when there are all favorable conditions for the market to develop.