Need more borrower protection mechanisms

Reducing interest rates, diversifying products, creating a clear and safe legal corridor for financial companies and customers... are solutions that, according to experts, can push back the current outbreak of black credit, pawnshops, and loan sharking.

Eliminate loan sharking

With the proportion of consumption in Vietnam's gross domestic product increasing from 52.5% in 2005 to 78.34% in 2016, it can be said that the personal and household credit lending market in Vietnam is extremely attractive and has a lot of potential. Mr. Nguyen Tu Anh, Deputy Director of the Monetary Policy Department - State Bank, said that the consumer credit market from 2011 - 2015 had an average growth rate of 30%/year. The total outstanding loans granted to customers reached nearly 600,000 billion VND.

According to Mr. Tu Anh, the market growth rate is still quite fast, in which commercial banks play a leading role with 90% market share. Therefore, in the coming time, it is necessary to expand consumer lending through financial companies, this is also a very effective solution to push back black credit and usury.

Make personal financial channels transparent so that people do not have to resort to black credit.

Supporting this view, according to economic expert - Dr. Le Xuan Nghia, Vietnam currently has many funds of associations, hui families... infiltrating the daily lives of people. This shows an economy with many business opportunities, but with many potential financial risks. Black credit exists because the law is not strict, still outside the law. There are cases specializing in black credit with a scale of up to several hundred billion VND.

According to Mr. Nghia, the scale of black credit in the whole country is up to tens of millions of USD. Meanwhile, the sanctions are too weak, so black credit not only operates outside the law but also "runs rampant" terribly; it is a "burden" on society and a "boil" on Vietnam's finance, reflecting the weakness of the legal system in handling financial violations.

'It is necessary to push back black credit by licensing and creating conditions for financial companies to operate transparently but under the supervision of the State Bank, law enforcement agencies, and consumer protection' - Mr. Nghia suggested.

Borrower Protection

Lawyer Truong Thanh Duc, Chairman of Basico Law Firm, also said that due to limitations in the development of financial services, many people have to borrow money from pawnshops, even resorting to black credit with very high interest rates.

“For people with low and unstable incomes who cannot access financial services from banks, consumer finance at financial companies is almost a “savior” for them, because without financial companies, they have to rely on black credit,” Mr. Dang Thanh Hung, Director of FE Credit Marketing Center, analyzed.

However, in order to develop, experts also recommend that in addition to reducing interest rates, diversifying products, and shortening procedures, current laws must also be amended to protect both lenders and borrowers. Lawyer Truong Thanh Duc suggested that the provisions of the law must be strict and clear. The finance company itself also determined that business must be methodical. More importantly, there must be a complete consulting process, a system of quality assessment regulations to select customers with the ability to pay to lend, and a system of legal documents to ensure that the content and wording in the contract do not cause damage to the rights of consumers.

According to Thanh Nien