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Legislation needed to protect consumer's borrowing rights

Update: November, 30/2015 - 08:28

Staff in Bao Viet Bank in HCM City branch serves her customers. Consumer loans are expected to grow rapidly in Viet Nam at the current time. — VNA/VNS Photo Tran Viet

HA NOI (VNS) — Consumer loans are expected to grow rapidly in Viet Nam, which means a legal framework is required to protect consumers and monitor the operations of credit institutions, experts said.

It should be ensured that credit institutions followed international practices and operated as per the country's situation, they said.

Bui Quoc Dung, director of the monetary policy department under the State Bank of Vietnam, said the management of consumer loans should aim at protecting borrowers, while promoting the market's healthy development by providing loan packages appropriate to consumer demands.

He said that consumer loans were expected to grow rapidly in the future, with an increasing number of credit institutions and financial companies providing this service.

Experts said Viet Nam, with a population of more than 90 million, was a potential market for the consumer credit sector.

Promoting consumer loans was considered an effective measure to limit informal credit that comes with exorbitant interest rates, offering opportunities to low-income earners to access financial services, stimulating purchasing power and contributing to economic growth.

Still, the interest rate is a matter of concern in consumer credit.

Lawyer Truong Thanh Duc from Banking, Securities, Investment Law Firm, said the interest rates of consumer loans remained high.

However, economist Le Xuan Nghia said high-risk loans often had high interest rates, adding that consumer loans were completely different from informal credit.

The statistics of credit institutions revealed that as of September 2015, the interest rates of consumer loans ranged between 20 per cent and 35 per cent per year, higher than normal loan interest rates.

Experts said the legal framework for consumer loans has to be improved to ensure healthy competition between providers through lowering interest rates and harmonising of benefits for both consumers and creditors.

Consumer loans have been increasing in Viet Nam in recent years, accounting for about 8.02 per cent of the total outstanding loans in the first nine months of this year, up from 5.4 per cent at the end of 2013.

The monetary policy department's statistics showed that consumer loans in the first nine months of this year jumped 31.49 per cent, when compared with the end of 2014. — VNS

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