Fitch Ratings believes larger, more established finance companies are better-placed to meet the new requirements while newer, smaller companies that concentrate on cash loans may find it harder to shift their business models. Vietnam’s new regulatory limits on unsecured consumer-finance personal loans will pressure the business models of more-exposed companies over the next few years, says Fitch Ratings. The rules highlight regulatory efforts to temper risks from rising consumer leverage, following aggressive consumer credit growth over the past few years. However, they may also push industry competition towards other product segments as lenders seek to grow. The State Bank of Vietnam’s Circular 18, released in late 2019, caps the ratio of personal loans for a finance company to 70% of its total consumer loans from January 2021. This falls to 60% from 2022, 50% from 2023 and 30% by 2024. Only customers with total personal loans exceeding VND20 million (US$860) with the company will count towards the cap. Such unsecured loans are typically higher-risk and known as ‘cash loans’ locally. The rules also add to consumer protection requirements, which should strengthen the sector’s social and governance aspects if well-enforced. The transition timeline follows a year-long industry consultation and provides breathing… Read full this story
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