Thriving Consumer Lending Market in Vietnam

Posted on by

By: Dezan Shira & Associates
Editor: Koushan Das

The consumer lending market in Vietnam, driven by a rise in consumption and favorable demographics, offers huge growth opportunities for investors. Consumer lending grew by 65 percent in 2017, compared to 50.2 percent in 2016. The market is predicted to grow from the current VND 600 trillion (US$26.45 billion) to VND 1 quadrillion (US$44 billion) by 2019.

DZS RELATED: Pre-Investment Advisory Services from Dezan Shira & Associates

The major growth factor has been the rise in household final consumption expenditure, which as a percentage of GDP in 2016 was 64.4 percent, higher than the global average of 58.3 percent and much higher than the average for middle-income countries, at 54.3 percent.

Sector analysis

In 2017, the consumer lending market grew by 65 percent compared to 50.2 percent in 2016, according to the National Financial Supervisory Commission (NFSC). The share of consumer credit in total outstanding loans increased from 12.3 percent in 2016 to 18 percent in 2017. Home loans accounted for the majority at 52.9 percent, while loans for home appliances and vehicles were 15.3 percent and 8.3 percent respectively.

The total consumer credit market share of commercial banks, who have mostly stayed away from consumer finances, increased from 39 percent in 2016 to 45.7 percent in 2017. However, the share of joint stock commercial banks and financial companies decreased from 47 percent in 2016 to 42 percent last year.

The country’s credit growth was around 18.7 to 19.3 percent in 2017, with medium and long-term loans accounting for 53.7 percent of the total lending. As for the major economic sectors, loans for industry, commerce, and services increased by 21.8 percent, while for agriculture, it grew by 18.7 percent. Real estate and construction loans witnessed a drop in 2017.

Major lenders in the Vietnamese market include FE Credit, which has a market share of 48.4 percent, followed by Home Credit, HS Saison, Prudential Finance, at 15.7 percent, 12.3 percent, and 8.1 percent respectively.

Related-Reading-Icon-Asean Link RELATED: Vietnam: Consumer Confidence Hits Record High

Entry of banks and foreign investors

With the market expected to grow 29 percent annually to VND 1 quadrillion (US$ 44 billion) by 2020, Vietnamese banks are planning to set up consumer finance divisions to increase their market share in the sector.

Orient Commercial Bank is planning to set up a subsidiary with a capital of around VND 500 billion (US$22 million) or acquire an existing finance company in the market. Similarly, the Axis Commercial Bank is also setting up a consumer finance division with a capital of VND 500 billion (US$22 million), while the Southeast Asia Commercial Bank acquired Posts and Telecommunications Finance Company for VND 710 billion (US$31.3 million).

In addition to the Vietnamese banks, foreign investors have also started to invest in the consumer finance market since last year. For example, HDBank sold 49 percent of HDFinance to Japan’s Credit Saison, while Techcombank sold an earlier acquired consumer finance firm to Lotte Card for VND 1.7 trillion (US$ 74.9 million). In January 2018, Korea’s Shinhan Financial Group bought Prudential’s consumer finance unit for US$151 million.

Related-Reading-Icon-Asean Link RELATED: Market Entry Modes for Vietnam

The consumer finance sector will continue to witness a double-digit growth in the next few years, largely driven by an increase in consumer spending, rise in urbanization, and the strict lending rules of domestic banks. This growth can lead to an increase in domestic consumption, which can have a positive effect on the overall economy. However, the government needs to encourage banks to increase consumer lending, while maintaining tighter controls on consumer finance firms, to reduce systemic risks.


About
 Us

Vietnam Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEANChinaIndiaIndonesiaRussia & the Silk Road. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.

Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region. We maintain offices in Hanoi and Ho Chi Minh City, as well as throughout China, South-East Asia, India, and Russia. For assistance with investments into Vietnam please contact us at vietnam@dezshira.com or visit us at www.dezshira.com

 

Related Reading Icon-VB

dsa brochureDezan Shira & Associates Brochure 
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.

DSA_Doing Business in Vietnam 2017_cover_126x90pxAn Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.

VB_2016_12_en_Managing_Contracts_and_Severance_in_Vietnam_-_Cover (1)

Managing Contracts and Severance in Vietnam
In this issue of Vietnam Briefing, we discuss the prevailing state of labor pools in Vietnam and outline key considerations for those seeking to staff and retain workers in the country. We highlight the increasing demand for skilled labor, provide in depth coverage of existing contract options, and showcase severance liabilities that may arise if workers or employers choose to terminate their contracts.

Leave a Reply

Your email address will not be published. Required fields are marked *

Dezan Shira & Associates

Meet the firm behind our content. Dezan Shira & Associates have been servicing foreign investors in China, India and the ASEAN region since 1992. Click here to visit their professional services website and discover how they can help your business succeed in Asia.

News via PR Newswire

Never Miss an Update

Subscribe to gain even better insights into doing business in Vietnam. Subscribing also lets you to take full advantage of all our website features including customizable searches, favorite, wish list and gift functions and access to otherwise restricted content.

Scroll to top