A consumer can have a maximum outstanding loan of VND100 million (US$4,400) at financial firms. — Photo vietnamnet.vn

A consumer can have a maximum outstanding loan of VND100 million (US$4,400) at financial firms, as per the State Bank of Viet Nam’s Decree No 43/2016.

This cap, however, will not apply to car loans, wherein the car is a mortgaged asset.

Experts said the cap will encourage financial firms to focus on lending small loans to promote consumption.

The decree, which comes into effect on March 15, has created the legal framework for growth in consumer lending, which is expected to see a boom in the next several years, driven by economic growth and a young population with high consumer needs.

Regarding interest rates, which remain a matter of concern in consumer lending, the decree said that financial firms will have to draw up regulations on interest rates, such as the highest and lowest rates for each product.

Consumer lending interest rates have always been higher than banking rates as the risks are higher.

Experts said the decree would improve market transparency, and sub-standard customers could get access to credit.

Consumer lending currently accounts for around 10 per cent of the total outstanding loans in Viet Nam, as compared to 25 to 30 per cent in the region. — VNS