A P2P lending app on a smartphone. The absence of a legal framework for the financial service has stymied Fintech companies for years. (Photo baochinhphu.vn)

Hanoi - A decree on regulatory sandbox for Fintech has been scheduled to come into force in Q3/2023, getting online lenders out of the regulatory limbo that they have been trapped in for years.

The absence of a legal framework for P2P lending has always been big trouble for Fintech companies. It has led to a serious misconception among many borrowers that the financial service is merely predatory lending.

And that is exactly the reason why the P2P lending market has been slow over the years. Scores of Fintech companies have had to cut their workforce by half on cause of slumps in sales and struggled to navigate the law's grey area.

Some others, such as VO247 and Finn Credit, have had to cease their operations owing to a dwindling customer base.

A manager of a Fintech company, who asked not to be named, said its sales had dropped by half compared to last year whereas its non-performing loans were rising steadily.

"We are on the verge of leaving the market. We see no prospect for growth," said the manager.

But they will suffer the legal uncertainty no more.

Pham Anh Tuan, Director of the Payment Department at the State Bank of Vietnam (SBV), said SVB would draw up a decree on regulatory sandbox for Fintech and submit it to the Government for approval no later than August to fill the legal gap.

"We are working to hand the decree in within August. If the Government approves it in Q3/2023, we will issue follow-up legal documents in early 2024," said Tuấn.
He also said the decree would be good news to both Fintech companies and borrowers as it paves the way for a regulated playing field for both.

Truongng Thanh Duc, director of the law firm ANVI, viewed consumer financing as a driving force behind economic growth and a regulatory sandbox for it could be a starting point for a fully-fledged legal framework in the future.

"We cannot neither regulate Fintech companies as we did to banks or leave them unregulated. That's why we need a regulatory sandbox to test regulations," said Duc.

The lawyer also called for the introduction of standard procedure for online lenders to follow when recovering their loans. Such procedure would prevent them from taking illegal measures to get their loans serviced.

Nguyen Quoc Hung, secretary-general of the Vietnam Banks Association, highly appreciated the introduction of the decree.

He said his association had sent appeals to SVB, calling for a legal framework for consumer financing, and now the appeals had been well heard.