Financial expert Nguyen Tri Hieu spoke to Nong thon ngay nay (Countryside Today) newspaper on the need to launch a national finance education programme.
Do you think the 10 per cent credit increase in the first eight months of 2015 as reported by the State Bank of Viet Nam (SBV) is much too low against the real figure?
I should say, the demand for capital in our economy is always high. The 10 per cent credit increase by the SBV is the official figure. Meanwhile the percentage of credit in the black market must be much higher. The real figure may be double, as the capital demanded by individuals and enterprises, particularly small and medium enterprises is very high.
However, the 10 per cent credit increase is higher than that of the previous year. It was attributed to the warming up of the real estate market and the slow recovery of the national economy.
It is reported up to 60 per cent of Vietnamese enterprises cannot access registered credit organis-ations due to cumbersome administrative procedures. So households also face this problem. Do you think this is the key reason for the black market credits or loan sharks to rear their heads?
In my own estimation, the demand for credits, from both the enterprises and households must be four times bigger than the 10 per cent credit increase in the first eight months of 2015. This is the key reason for loan sharks to develop rapidly.
If administrative procedures to access official credits were simpler, I'm confident that there will be no place for black credits to operate.
At a recent workshop on black credits, many participants, including financial experts and lawyers blamed the failure to access official credit organisations by many borrowers on their poor knowledge about our credit policy. How do you respond to this?
I don't think we can eliminate loan sharks from our society. Neither do I think that the government can find solutions to discourage the people to seek loans from loan sharks. It is a reality that in whatever society, there is a certain groups of people that can't access official credits as they cannot satisfy the latter's requirements while they are desperately in need of money. If some of them are lucky, they can borrow money from relatives or friends. Such a kind of transactions is also called an informal credit as there is no credit contracts signed between lenders and borrowers.
However, at present, I have to say that black credits, in one way or another, they have positively met the borrowers' demands while our official credit organisations' financial capacity is still limited and our administrative procedures are cumbersome.
According to official statistics, sometimes the interest rate in the black market is 128 times higher than a bank's interest rates. But, quite a few people, in their dire situation, have to accept the black market loans. That's why it is impossible for us to erase black market credits. Do you agree?
I think we can only restrain the operation of black market lending by having a good and workable legal system in place. It is more important that we should come up with a definition of what is a black market credit. In our existing laws, I don't think there is a clear definition of a black market credit. Our Criminal Code or Civil Code only regulates the kinds of lending activities that are prohibited in Viet Nam. For example, any lending act with an interest rate of 150 per cent higher than the basic interest rate from banks is prohibited. In addition, there are no legal documents available in our country talking about the types of credit that are not allowed to operate.
In addition, I think the government should adopt policies to give due sanctions to black market loans while promoting communication to help people understand the government's credit policies.
Will you please further elaborate on your idea about raising the people's awareness about the government's policies?
In my opinion, the government should do this job. I still remember when I worked for a bank in the US, we launched a communication campaign "Money smart" at the request from the government.
In that campaign, we taught our clients and people in general, including school children on how to differentiate the real notes from the fake notes; how to open a bank account; what's a shark loan and others.
With my experience, I suggest that Viet Nam should launch a communication campaign to provide the people with proper knowledge about money and how to use it in the society. — VNS