General Secretary Nguyen Quoc Hung took a photo with the Board of Directors of the Consumer Finance Club for the term 2022-2025 (photo: thitruongtaichinhtiente.vn)

A consumer finance alliance was established last week to address the issues plaguing the industry. The Consumer Finance Club (CFC) under the Vietnam Banks Association (VNBA) has 11 members, which are all prominent consumer finance firms in Vietnam.

Le Quoc Ninh, general director of MB Shinsei Finance Co., Ltd., said that information sharing is essential for consumer finance firms to prevent fraud. “The group is focusing on building a shared database as part of its operational agenda. It will roll out a framework for members to share and utilise data from a data warehouse, which will help lessen the detrimental impact and increase transparency for consumer financial lending activities,” Ninh said.

Nguyen Quoc Hung, general secretary of the VNBA, said that the operations of consumer finance firms are mainly characterised by providing loans to underbanked people.

“Thus, there are high risks as it is difficult to identify the purpose of using loans. Debt collection remains a challenge for businesses in the consumer finance industry. Many customers fail to pay their debts when they are due. Some customers are willing to manipulate and exploit public sentiment in order to evade their obligations to pay debt,” Hung said.

Another pressing problem is the growth of illegal lending applications enticing people to borrow money at high interest rates. “As a result, many borrowers are avoiding debt despite many dire consequences,” Hung added.

Speaking at last week’s launch of the CFC in Hanoi, Doan Phuong Linh, a representative of Shinhan Vietnam Finance, said, “Rising fraud cases are plaguing Vietnam’s consumer finance industry. We need a system that outlines the rights and responsibilities of financial companies when using, accessing, and exploiting fraud prevention data. The initiative of a shared data warehouse will help protect both financial firms and their clients.”

Linh added that some industries have adopted similar strategies to combat fraud. In the insurance industry, for example, companies have prevented many large-scale frauds by sharing their data back with the Vietnam Insurance Association.

According to the National Cyber Security Centre under the Ministry of Information and Communications, over 2,600 fraud cases have been reported so far this year. Nearly one-third of the cases are related to black credit activities via mobile apps. Most of these apps advertise loans with low-interest rates and quick disbursement.

Meanwhile, Dao Minh Tu, Deputy Governor of the State Bank of Vietnam, announced last week that the banking system would implement a credit package worth VND20 trillion ($869.56 million), with tenure ranging from three months to three years. Specifically, this package’s interest rate will be equal to half of the current lending rates, with the main purpose of supporting employees working in industrial zones (IZs) in order to repel black credit.

Facing the scenario of black credit creeping into the lives of employees in industrial zones, FE Credit a fortnight ago promised to provide a package of VND10 trillion ($434 million) with an interest rate equivalent to 50 per cent of the current rate to lend all necessities and reasonable demands of employees. HD Saison has also followed suit with a similar package to support workers in IZs.