Cash loans cannot exceed 70 percent of a finance company’s total loans for consumer durables starting 2021, according to a decree issued recently by the State Bank of Vietnam (SBV). 

The ratio will drop to 60 percent in 2022, 50 percent in 2023 and 30 percent in 2024.

Finance companies can only disburse cash loans for customers without bad debt records with the National Credit Information Center under the central bank. The decree is set to take effect on January 1, 2020.

Competition has intensified in the consumer loans division as new players enter the market. Vietnam had very few finance companies in 2015, but as of June this year 16 firms had received permission to operate, not counting alternate lending and pay-day loan platforms, SBV data shows.

FE Credit, the biggest player so far, accounts for 47.3 percent of the market, followed by Home Credit with 16.9 percent and HD Saison with 10.1 percent, according to financial data provider FiinGroup.

However, finance companies’ revenue growth has been slowing down, from 87.4 percent in 2015 to 15.3 percent last year, it said.

Outstanding consumer loans amounted to 19.7 percent of Vietnam’s total outstandings last year, up 3 percentage points from 2017, FiinGroup added.