Banks turn to individual borrowers on low corporate demand
July 04 2013
Thuy Trieu -These lending programs are deployed in various forms, including credit cards, home loans and loans secured by cars, with simple procedures and quick disbursement.
Tien Phong Bank has just launched a program in which loans will be disbursed within one hour after car ownership certificates are secured. Individual clients can take out loans worth up to 60% of their car values, at most VND2 billion.
Meanwhile, OCB is advertising home and car loans for individuals with a preferential lending rate of 8.99% per year for the first three months and 12.49% for the following nine months. Since May, this bank has set aside VND700 billion as consumer loans with a fixed interest rate of 12.49% for the first year.
ACB is also promoting consumer credit, with a maximum credit limit 15 times higher than a borrower’s income. The bank only gives loans to those with a monthly income of VND6 million or above, except teachers and doctors, who only need to have an income of over VND4 million.
Comparing the costs of consumer credit with the profits from this activity, banks find this type of lending attractive, especially when businesses are facing many difficulties. Besides, consumer credit is a form of demand stimulus, which help businesses sell their goods, said Nguyen Thu Ha, former deputy general director of Vietcombank.
The time is now appropriate to boost consumer credit, she remarked, since the demand of local consumers and their incomes are on the rise.
A research by Vietcombank forecasts consumption via credit cards will grow by 25-30% in the 2013-2017 period. In addition, consumer goods sales will rise 20% and motorbike sales will increase 10% per year, showing the great potentials of the consumer credit market in Vietnam, says the research.
Home Credit, a company giving loans for buying motorbikes and household appliances, is doing its business well in Vietnam. As of end-June, the company had had 672,000 clients, up 20% over end-2012, with a network of 2,890 transaction points at motorbike stores and supermarkets nationwide.
By the end of 2012, there had been five forms of consumer credit, namely property loans, auto loans, motorbike loans, household appliance loans and credit cards.
Consumer loans are mainly granted by banks. Most financial companies just offer loans for purchase of motorbikes and household appliances, holding a 4% market share by late 2012.
Consumer loans usually have an interest rate of 13-25% per annum, charged by banks, and 24-65%, by financial companies. Credit card interest rates are around 15-25% a year.
Outstanding consumer loans as of end-2012 had totaled VND230 trillion, accounting for 8% of the total outstanding loans in the economy, said Ha.
In HCMC, outstanding consumer loans by late April had picked up 2.2% against end-2012, standing at 5.6% of the total outstanding loans in the city, according to the central bank’s branch in HCMC.
Operating in Vietnam poses many risks to consumer creditors. Ha suggested banks should develop their own systems of personal credit ratings and customer information to facilitate risk management.