Removing difficulties in consumer lending, pushing back black credit

Low consumer credit growth, bad debt increases

In the National Comprehensive Financial Strategy to 2025, with a vision to 2030 approved by the Prime Minister, there is an emphasis on developing consumer lending products that are suitable for consumer borrowers, with reasonable interest rates, contributing to preventing “black credit”. Consumer finance is considered an important solution to achieve the goal of increasing people’s access to capital, effectively contributing to preventing black credit.

Over the years, consumer lending through official channels such as commercial banks, finance companies, and fintech companies has been meeting the demand for personal spending capital, helping to prevent people from having to resort to black credit. It is estimated that licensed consumer finance companies have so far helped about 30 million people access loans, with an average outstanding debt of about 35-50 million VND/person.

Mr. Le Quoc Ninh, General Director of MB SHINSEI Finance Company Limited

Sharing at the Workshop "Resolving difficulties in consumer lending - Repelling black credit" organized by the VTVMoney Economic Information Ecosystem, the Center for Digital Content Production and Development - Vietnam Television on October 31, 2023, Mr. Nguyen Quoc Hung - General Secretary of the Banking Association said that by August 31, 2023, the outstanding loans for life of the whole system reached about VND 2,671,000 billion, accounting for 21% of the total outstanding loans of the economy, an increase of 0.35% compared to December 31, 2022, bad debt accounted for over 4%.

Of which, the outstanding loans for living needs of 16 financial companies are 135,945.36 billion VND (accounting for more than 5% of outstanding loans for living needs). However, the bad debt of financial companies has now reached 8-10%, with some companies having bad debt up to 20%. Many companies are in a difficult situation, even losing money due to having to set aside high provisions for bad debt risks.

Explaining the increase in bad debt, according to Mr. Hung, in addition to objective factors and common difficulties, there are also subjective and very dangerous factors that have not been dealt with yet, such as customers intentionally not paying their debts, and previous customers advising later customers not to pay their debts.

"Consumer finance companies are confused about how to collect debts. What is the attitude of state management agencies in dealing with those who deliberately delay paying their debts?", Mr. Hung said.

Being equated with "black credit"

Speaking more about the difficulties, Mr. Le Quoc Ninh, General Director of MB Shinsei Finance Company Limited, said that financial companies licensed by the State Bank are being equated with black credit organizations, causing business activities to be severely affected.

"There are 16 consumer finance companies licensed by the State Bank, but the positive value of these companies is being diluted by the encroachment of hundreds of informal credit organizations - also known as black credit. The explosion of fake consumer lending apps has distorted many people's views on the operations of licensed financial companies," Mr. Ninh emphasized.

In addition, the debt repayment awareness of some customers is also causing great difficulties for financial companies. A series of groups have been established to share ways to avoid debt, one person tells the other, creating great consequences for the market as well as financial companies.

"Black credit" rises

According to Mr. Nguyen Quoc Hung - General Secretary of the Banking Association, with the increase in bad debt, many financial companies are unable to continue expanding lending. This makes it impossible for low-income people and those in difficult circumstances to access loans from consumer finance companies.

In addition, according to Mr. Hung, with financial companies unable to continue expanding lending, the consequence is that black credit has begun to rise. Although state management agencies have actively cracked down on many black credit groups, the situation is still very complicated in many sophisticated forms, especially in the online environment.

Regarding the situation of illegal credit, speaking at the Workshop, Major Nguyen Ngoc Son - Deputy Head of Department 6, Criminal Police Department, Ministry of Public Security said that in the fourth year of implementing Directive No. 12, the police force has prosecuted 89 cases, and 434 defendants involved in illegal credit activities. Among them, there are many gangs or groups of subjects operating in high technology, including foreigners who set up under the guise of hiring Vietnamese people to operate illegal credit activities with interest rates of up to thousands of percent.

According to Mr. Son, through assessment, the black credit situation is emerging in 3 ways: "traditional"; "traditional combined with technology" and "completely using technology".

"Illegal credit operators are increasing their mobile activities, committing crimes in many areas, taking full advantage of technology, social networks, applications, websites... distributing leaflets and advertisements to solicit loans, especially for households, small businesses, low-income workers, workers, teenagers...", said Mr. Son.

To solve this problem, the authorities have actively gathered information, investigated and handled subjects related to illegal credit. A representative of the Ministry of Public Security said that in the past 3 years, 2,740 cases with nearly 5,000 subjects related to illegal credit have been discovered, 3,399 defendants have been prosecuted. In the first 6 months of this year alone, the police have discovered and handled more than 700 cases, prosecuted over 400 cases and 800 defendants.

Major Nguyen Ngoc Son, Deputy Head of Department 6, Criminal Police Department - Ministry of Public Security

In the coming time, the economic, labor and employment situation will still face many difficulties, along with the increasing financial needs at the end of the year, there will be illegal acts caused by black credit.

Paving the way for mainstream lending

At the workshop, to raise consumer awareness, speakers provided more information about support packages for people to access safe loan sources; signs to help people identify legitimate consumer finance companies, avoiding falling into the "trap" of black credit.

According to economist Dr. Can Van Luc, consumer lending is currently carried out through three official channels: lending through commercial banks, lending through financial companies and lending through a number of other credit institutions. However, each segment will have different lending targets and objectives. One of the main reasons for the high level of bad debt in consumer lending comes from the perception that "easy to borrow, easy to default".

Therefore, Ms. Nguyen Thanh Tung (Deputy Director of the Department of Credit for Economic Sectors - State Bank) emphasized that the solution is to enhance people's responsibility "when borrowing, they must be aware of repaying the debt".

The representative of the Ministry of Public Security also stated that in order to push back black credit, relevant agencies and organizations need to continue to carry out assigned tasks and solutions, promote coordination with relevant units, to prevent, detect and destroy black credit organizations.

Experts attending the workshop.

Local departments also need to further promote propaganda on many platforms about the harms and consequences of black credit; create conditions for workers and laborers to access safe and preferential loan sources.

The representative of the Ministry of Public Security also emphasized the need to speed up the progress of information verification, clean up and eliminate junk SIM accounts and virtual accounts, deploy financial support solutions for people through population data applications and soon have solutions and directives to verify user information on social networking platforms and accounts in cyberspace.

Regarding this issue, Mr. Le Quoc Ninh, General Director of MB SHINSEI Finance Company Limited (Mcredit) suggested that it is necessary to promote economic development, the State Bank should reduce interest rates, implement preferential credit packages, and flexibly use policies to support businesses to easily access loan sources, thereby removing difficulties for businesses, especially in the real estate and tourism markets. When the economy recovers production, business activities improve, more orders are placed, workers return to factories, and people's lives improve, it will help stimulate consumer demand as well as consumer credit.

In addition, it is necessary to strengthen communication activities on formal consumer credit; local authorities coordinate to deter customers who do not pay debts; research and develop a legal corridor for professional debt settlement contracts; apply a separate bad debt threshold for financial companies; build a blacklist database at credit institutions, etc.

Huong Anh (t/h)

Source: https://www.nguoiduatin.vn/go-kho-cho-vay-tieu-dung-day-lui-tin-dung-den-a633690.html