The Credit management outlook
Vietnam’s economy is currently in a gloomy gray color. Specifically, this situation is reflected in the balance sheets of domestic banks with many of them listing non-performing loan (NPL) ratios in the first quarter of 2023 of about 3% (according to VnEconomy). Previously, the total outstanding loans of whole financial institutions system by the end of 2022 reached over VND 12 million billion. In which, the total outstanding loans of 16 financial companies licensed by the State Bank of Vietnam (SBV) reached over VND 220 trillion, accounting for 1.87% of the total outstanding loans of the whole economy and 8.5% of the total outstanding consumer loans. Although accounting for a very small percentage, it has supported about 30 million people to access loans, with an average loan balance of about 35-50 million VND for each person.
However, the on-balance sheet NPL ratio of the whole system by the end of February this year was up to 2.91%, compared with 2% at the end of 2022 and nearly double by the end of 2021. Gross NPL (including on-balance sheet NPL, unresolved debt sold to Vietnam Asset Management Companies and potential NPL of Financial institutions system) by the end of February is estimated to account for 5% of total outstanding loans.
NPL increase impacts the Vietnam’s credit market.
Sharing about current situation of high NPL ratio, Mr. Przemek Januszaniec, CEO of FLOW Group said, “In my opinion, the NPL will continue to increase in the coming time. The main reason comes from the fact that the consumer credit market is in crisis due to the impact of the COVID-19 epidemic, the global economic recession, and interest rates to increase affecting ability of customers to repay loans. In parallel financial institutions reduced their risk appetites and tightened underwriting policies. As a consequence of those two factors NPL portfolio is growing much faster in the market. “
In addition, those negative effects have led to an ominous consequence, a huge group of individuals who avoid paying debts, leading to NPL of some financial companies increase up to 20%. Even in 2022, some of them had to deal with losses of thousands of billions VND, mainly due to consumer lending in cash, creating favorable conditions for customers to avoid paying their debts. Many financial companies, fintechs freely provide cash lending and almost have no ability to control over the customers’ capital usage. Many individuals have profited from this situation to find ways to avoid paying debts or spending wastefully. As a result, some lenders responded by committing illegal and unconventional debts collection, which caused many consequences.
In order to solve the above problem and support lawful debt collection units, illegal debt collecting need to be condemned among the society and the solution to prevent it is the must. However, it is also necessary to have a legal framework for lawful debt collection as well as sanctions for customers who intentionally avoid paying their debts.
At FLOW, we deploy ethical credit-management methods with high-quality negotiation techniques such as voice-to-text quality check, emotion detection and skill-based call routing. Moreover, intimidation approaches are prohibited with zero tolerance to aggression and abuse. Using this way, FLOW Vietnam has near to zero complaint from about 52.000 customers in the first half of 2023.