Insight Edge Into Consumer Credit

Vietnam's consumer finance market encountered its toughest year in 2023, experiencing a -9.1% YoY decline in loan book growth. This downturn was driven by economic slowdowns, reduced credit demand, worsening borrower credit quality, challenges in debt collection, and stricter lending practices. Despite these difficulties, there are opportunities for mid and small-sized financial companies to flourish, as well as increased potential for collaboration and M&A for investors and vendors looking to partner with finance companies (FinCos).

Introduction 

Vietnam's consumer finance market encountered its toughest year in 2023, experiencing a -9.1% YoY decline in loan book growth. This downturn was driven by economic slowdowns, reduced credit demand, worsening borrower credit quality, challenges in debt collection, and stricter lending practices. Despite these difficulties, there are opportunities for mid and small-sized financial companies to flourish, as well as increased potential for collaboration and M&A for investors and vendors looking to partner with finance companies (FinCos). 

Key highlights: 

• Economic Context: Vietnam's GDP growth and trade balance showed signs of recovery in early 2024. However, the consumer finance market is expected to continue facing challenges, as consumer demand remains stable with few indications of significant growth. 

• Competitive Landscape: The consumer finance market has become more fragmented due to the emergence of new players employing aggressive market acquisition strategies & effective digital initiatives. While Finance Companies’ profitability is anticipated to recover gradually, asset quality will need to be closely monitored amid ongoing economic uncertainties. 

• Credit Scoring: Over 90% of retail companies are financially stable, though 10% are high-risk, highlighting economic vulnerabilities. 

• Long-term Prospects: Despite challenges, Vietnam's consumer finance market remains highly promising, driven by low current penetration rates and favorable demographic factors. 

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