Consumer lending in VN surged 65% in 2017

Lending for transport vehicles made up 8.3 per cent of total outstanding loans

The proportion of consumer credit in total outstanding loan of the entire banking system was estimated at 18 per cent in 2017, up from 12.3 per cent in 2016. Of this, home loans accounted for 52.9 per cent. Lending for home appliances and transport vehicles made up 15.3 per cent and 8.3 per cent, respectively.

Nguyễn Văn Thùy, deputy director of NFSC’s general supervisory pision, attributed the sharp surge in consumer credit to a high demand for housing, arising from a young population and urbanisation.

Besides this, a large portion of the population was gradually moving from cash payments to bank payments and were willing to borrow for their lifestyle needs, Thùy said.

The report also said the consumer credit market share of commercial banks increased from 39 per cent in 2016 to 45.7 per cent at the end of 2017, while the rates at joint stock commercial banks and financial companies decreased slightly from 47 per cent in 2016 to 42 per cent by end-2017.

Thùy said that the consumer credit would remain a potential and strategic area of credit institutions and was forecast to witness high growth next time.

Economist Lê Xuân Nghĩa said consumer lending was a global trend, citing Europe as an example where consumer credit accounted for some 71 per cent of total bank loans.

The proportion of consumer lending in Việt Nam’s economy was lower than that of other countries with medium income. Việt Nam’s consumer loan was 18 per cent against 30 per cent in other countries.

To seize the trend, banks needed to form a safe database of customers with the help of improved information technology to avoid landing in a soup due to the changing information of inpidual customers, Nghĩa said.

Nghĩa emphasised that despite the high growth rate of consumer lending, the risk was considerably low.

He said that in a recent meeting with the Prime Minister, the National Monetary and Financial Policy Advisory Council suggested that according to the global trend, Việt Nam needed to further develop consumer credit to boost the domestic market, which would help support local business and production. It also underlined that the country needed to control the risk of consumer lending.

The NFSC report also showed that Việt Nam’s credit growth in 2017 was estimated at some 18.7-19.3 per cent, of which medium- and long-term loans decreased after remaining high during 2013-16, accounting for 53.7 per cent of the total lending.

In terms of economic sectors, agriculture loans increased slightly by 18.7 per cent, while that of industry, commerce and services increased by 21.8 per cent. The past year also saw a slight decrease in real estate and construction lending.