The biggest difficulty for financial companies in the past year has been raising capital, according to various industry leaders. Deposit interest rates in the market are continuing to increase, while financial companies are only allowed to mobilise from corporate deposits. Hence, the cost of capital tends to increase, affecting the companies’ net interest income.

FE Credit says it is necessary to strengthen inspection and supervision of credit activities, photo Le Toan

According to Nguyen Thanh Phuc, deputy general director of FE Credit, deposit interest rates in the market have increased considerably in recent times. Some banks are paying interest rates of above 11.5 per cent. Financial companies must now mobilise capital from businesses with interest rates up to 11.5 per cent, which is still difficult.

“I do not support the imposition of an interest rate ceiling because it is clear that we have gradually reduced state management by administrative measures. If the State Bank of Vietnam (SBV) imposes a ceiling on interest rates, credit institutions will all mobilise at the same interest rates, financial companies will not be able to raise capital. All businesses will deposit money at banks to enjoy additional financial services, not at financial companies which only serve mobilisation,” Phuc said.

Vu Duc Thang, general director of Post and Telecommunications Finance Company, added that the company mobilised from credit institutions or businesses to borrow and its input capital increased by about 4 per cent, while committing to the SBV’s ceiling of the lowest lending rates in the market.

“In the current economic situation with increased bad debt, it is very difficult for the company to try not to increase lending rates and keep interest rates stable to support customers,” Thang said. “I hope deposit interest rates will be stabilised so that financial companies can at least stabilise input prices and find solutions to lower interest rates for vulnerable workers.”

A representative from Lotte Finance Company said that the company has only been established for a few years, so domestic mobilisation faces many difficulties and mainly depends on sources abroad. This is also risky, especially in the context that the US Federal Reserve raised interest rates many times in 2022, so the input cost of mobilisation has been high.

“I look forward to stabilising domestic deposit rates so that the company has the opportunity to expand domestic capital mobilisation,” said the Lotte representative.

The general director of another financial company told VIR, “The money supply is low and cannot be circulated because public investment projects are on paper. Almost everything is dependent on public investment to find a way out. However, this direction is currently entangled with everything due to outdated and overlapping laws. There is no bright spot in 2023, and difficulties will continue into 2024.”

Finding new directions to adapt to socioeconomic changes is a common ambition of leaders of financial companies. Solutions include paying more attention to environmental, social, and governance standards, attracting more funding from strategic shareholders, and cutting operating costs more efficiently by using tech in business activities.

In fact, the wave of digital transformation at credit institutions has never been stronger than it is today, although the level and choice of investment in each institution are different. Ho Minh Tam, general director of Viet Credit, said that each credit institution must answer several questions before embarking on digital transformation.

“Firstly, which consumer segments is your credit institution targeting? Secondly, what are the core capabilities of your credit institution and how can a digital transformation strategy strengthen and elevate the system? As your credit institution has evaluated options, consider the potential trade-offs and conflicts associated with each model, with particular attention to factors such as strategy and organisational culture, existing technology, cost pressure, and risk appetite,” Tam said.

For risk management and credit appraisal activities, Phuc of FE Credit said that it is necessary to strengthen inspection and supervision of credit activities, proactively control credit quality, assess debt repayment capacity, limit bad debt arising, and proactively handle recovery.

“It is necessary to improve the quality of operation, through improving system features and developing applications for the credit processing team. The company has researched and developed technology solutions to optimise resources and improve work efficiency,” Phuc said.

For network security, according to Phuc, it is required to regularly review and improve network infrastructure, deploy network security solutions, monitor access, and provide awareness training for both customers and employees.