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National scientific conference: Restricting black credit in Vietnam. Photo: H. Diu

Black credit accounts for 6-8 percent of total loans

On December 20, in Hanoi, the Banking and Finance Institute, National Economics University held a National Science Conference: Restricting black credit in Vietnam.

According to Assoc. Prof. Dr. Dang Ngoc Duc, Director of the Banking and Finance Institute, black credit accounts for 30-35 percent of total informal credit, equivalent to 6-8 percent of total outstanding loans of the economy. In 2015-2018, there were more than7,600 crimes related to black credit nationwide. This number is still large because deterrent measures and punishments for black credit crimes are not strong enough.

Sharing the same view, Colonel Pham Van Tam, Deputy Director of the Criminal Police Department, Ministry of Public Security said besides handling sanctions related to incomplete black credit, the cause of black credit is due to people not meeting conditions of lawful loan organisations; borrowers take part in evil activities andmany people use idle money to lend money or mediate leads to insolvency.

Also according to Colonel Nguyen Van Tam, cases related to black credit aredifficult to detect, collect and consolidate evidence. Because subjects often hide the contract in private places, make it easy to destroy anduse social networks to close the contract. Moreover, the subjects also use many "tricks" to bypass the law, such as collecting the principal first, if the borrower pays off the principal, theywill convert the interest into the principal so when it is discovered, it is impossible to conclude the subjects earned interest; or using tricks to make loan contracts: do not show interest rates, mortgage with personal papers andtaking advantage of information technology, software, phone applications to lend.

Improve competitiveness for the bank

From these difficulties, Assoc. Dang Ngoc Duc said it is necessary to have a national programme to deal with synchronous solutions with the coordination of many stakeholders. This urgently needs the cooperation of the five "houses": regulators, credit institutions, citizens, authorities and mass organisations, along with security agencies, communication, technical and technological support organisations.

In addition, he also said to limit black credit, authorities should limit cash lending, connecting lending services, lending products and public services. Assuming people want to borrow money for medical treatment, the lending organisationcan connect and pay directly to the hospital, avoiding people using the loan for the wrong purpose, which can cause bad debts.

Besides, experts at the seminar said to limit black credit, it is firstly important to make people see the advantages of borrowing from credit institutions rather than outside, borrowing from the “gangster organisations". The solution may be to borrow capital with simpler procedures, lower interest rates or banks increase their competitiveness by developing information technology applications and digital services for people, because currently black credit loans through mobile applications are quite common.

Along with the above problem, Nguyen DinhThang, Chairman of Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) suggested there should be a policy to support commercial banks to lend below standards. Because people who seek black credit are often poor, do not have collateral, and are not eligible for bank loans, to support people to stay away from black credit, they should offer subprime lending regulations. Banks will balance and offer products within safety thresholds.

Black credit: Sanctions, penalties are not deterrent enough VCN - This was stated by Mr. Pham Van Tam, Deputy Director, Criminal Police Department, Ministry of ...

Moreover, according to Thang, banks supportingpeople to stay away from black credit is a social responsibility because banks always put safety and efficiency, capital conservation first in the business activities. Therefore, improving the form of lending andsubprime lending will help commercial banks have acounterbalance tool for black credit loans, thereby attracting people to find formal and legal loan channels.