80% of Vietnamese do not have bank accounts, and "financial exclusion" is a social issue.
In rapidly developing Vietnam, about 79% of the population does not have bank accounts. Without bank accounts, accessing financial services such as insurance and loans is almost impossible. This phenomenon is known in economics as "financial exclusion."
P2P lending complements Vietnam's financial situation.
P2P (peer-to-peer) lending, also known as social lending or crowd lending, is characterized by eliminating intermediaries from the borrowing process.
Since collateral is not required, it poses significant risks to lenders compared to traditional brick-and-mortar lending institutions. The interest rates for P2P loans typically range from 10% to 20%, making them attractive to investors seeking high returns.
Vietnam has a high internet penetration rate, and P2P lending through mobile devices has been growing rapidly in recent years.
On the other hand, many Vietnamese people have smartphones and use the internet even without having bank accounts. Vietnam's internet penetration rate is 67%, higher than the regional average of 58%, and about three-quarters of the adult population own smartphones. Since P2P loans do not require collateral, as long as they have an internet-connected smartphone, lending is possible, and the widespread use of smartphones plays an essential role in the infrastructure of P2P lending.
Vietnam has a relatively young population, with over 61% of the population aged between 15 and 54. This means that the majority of the country is in the age group that is more likely to take out loans for housing purchases or entrepreneurship.
When Vietnamese people without bank accounts needed funds and couldn't rely on family, they often had to turn to informal lenders (loan sharks). Even if they could get loans, they often had to pay very high interest rates.
The introduction of P2P lending platforms such as VayMuon and Tima changed this situation.
VayMuon, a subsidiary of NextTech Group of Technopreneurs, targets individuals seeking short-term small loans ranging from 1,000,000 to 10,000,000 VND (approximately 43 to 430 USD). It takes about 4 hours to wait for the first loan, but it is usually approved in as little as 30 minutes.
The company, which started with just five people, now employs more than 150 staff in three offices in Vietnam, Myanmar, and Cambodia.
On the other hand, Tima offers various types of consumer loans, from student funds to housing and auto loans. The company has its own credit scoring system generated by analyzing data from borrowers' social media accounts to assess their creditworthiness. The company's valuation is currently 5,000 billion VND (about 21 million USD), and it claims to have over 2.1 million borrowers and more than 23,000 lenders on its platform.
Small and medium-sized enterprises (SMEs) also face similar challenges in corporate lending.
Currently, the growth of small and medium-sized enterprises (SMEs) in Vietnam is constrained by the lack of access to financial services, with up to 60% of companies unable to access banking services. Against this background, many P2P lenders are providing services to SMEs.
HuyDong, which focuses on business loans, classifies loans into different grades. Assessments are evaluated from Grade A to Grade F, and interest rates are set based on the assessment.
Lendbiz provides loans to corporations and small businesses (micro-enterprises). It adopts a strict credit rating system that considers over 100 criteria, including financial and non-financial indicators, and conducts face-to-face loan screenings in addition to requiring the submission of business plans.
Due to the immaturity of the industry, regulatory developments are expected to be closely monitored.
In Vietnam, the lack of regulation of P2P lending is seen as a problem. Vietnamese P2P lenders are usually registered not as financial institutions but as investment consulting companies and are generally outside the scope of lending regulations, including setting lending rates. As a result, cases where interest rates reach up to 70% annually have been observed.
However, Vietnam is gradually progressing towards regulating this field. The government recently announced the development of a pilot program for P2P lending, and a series of official rules are expected to be established thereafter. In addition, the State Bank of Vietnam has issued a draft regulation, and if approved, new regulations will be introduced for unsecured personal loans offered by VayMuon and Tima. Future developments are anticipated.
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