Personal consumer credit becoming lucrative business

FE Credit is leading the consumer finance market with $1.4 billion worth of loans provided in 2016, accounting for 48 percent of market share.  Its rivals, Home Credit, HD Saison and Prudential, hold 15.7 percent, 12.2 percent and 8.1 percent, respectively, according to StoxPlus. The other well-known names in the market are Mirae Asset Finance, JACCS and Toyota finance.

The consumer finance market has become bustling thanks to high demand from borrowers and readiness by commercial banks and finance companies. Since customers are in both large cities and rural areas, it is easy for finance institutions to expand the market and disperse risks.

Lending to fund personal consumption is lucrative, which accounts for 42.5 percent, followed by lending to fund household goods (28 percent), and transport means (19.6 percent).

Regarding the growth rate, lending to fund transport purchases and house upgrading witnessed the highest growth rate of 42 percent each in 2016.

Business Monitor International (BMI) predicted that the consumer finance market would perform well in 2016-2019, as personal income has growth rate of 13.2 percent per annum.

Also according to BMI, consumer finance targets people of working age, expected to reach 56.2 million by 2020. The figure was 54.4 million in 2015.

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The consumer finance assets were reported as making up 12.4 percent of total assets in 2016.

By the end of the year, the finance consumer value had reached VND598.5 trillion, an increase of 30 percent over 2015. This included VND453.1 trillion worth of loans provided without mortgaged asset requirement.

Consumer finance in Vietnam in 2016 made up 9.8 percent of GDP. Meanwhile, the figure was 320 basic points higher in regional countries.

Regarding credit types, the cash is predicted to decrease from 89 percent in 2016 to 81 percent of total outstanding loans by 2019 as the market share will fall into credit cards.

Regarding the market structure, consumer finance is undertaken by retail banks and finance companies. Commercial banks tend to set up subsidiaries specializing in consumer finance or to take over existing companies.

MB Bank in March 2016 took over Song Da Finance Company (SDFC) and renamed it MCredit. Later, in November 2016, after joining hands with Shinsei Financial from Japan, MCredit once again changed its name to MB Shinsei with 51 percent of capital contribution from MB Bank.

In recent years, Vietnam has not granted licenses to companies providing only consumer finance services, which was a barrier to market admission.

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