Financial technology (fintech) companies could be a great source of capital for small and micro enterprises, but a complete legal framework is needed to sustainably develop the capital channel, experts said.

The demand for loans of small and micro enterprises is very high, but their ability to access credit sources is hindered by collateral barriers. Although banks claim to have excess capital to lend to smaller companies, the requirement for collateral has caused a series of small and micro enterprises to fail to access bank loans and to struggle to find ways to mobilise capital from other sources.

In that context, fintech companies have become a new choice and bring hope to small and micro enterprises that are thirsty for capital as they provide alternative lending solutions thanks to their advantages in technology and data.

Fintech companies do not require collateral, but rely on financial information and customer behaviour to assess creditworthiness and make lending decisions. This helps many small and micro businesses access capital more easily.

However, the development of fintech companies is also facing significant difficulties in debt recovery due to a lack of a specific supporting legal framework. This has caused many fintech companies to face the situation of debt default when customers have no intention of repaying their loans.

In addition, cases of financial fraud and impersonation of financial companies to commit fraud have also increased, which have created significant risks for fintech companies.

General Director of EVN Finance, Mai Danh Hiền, said fintech companies are having headaches due to impersonation and fraud cases.

According to Hiền, the current legal regulations for fintech still have many shortcomings. Most financial companies only focus on consumer lending, while the small business lending market is still an unexplored land due to legal barriers.

“The lack of a legal framework is the biggest barrier to the development of fintech. This needs to be improved to support financial technology sustainable development,” Hiền said.

Dr Nguyễn Đức Kiên, former Deputy Chairman of the National Assembly's Economic Committee, believes a cooperation model between traditional financial institutions and fintech companies to address the credit difficulty for small businesses.

International experience has also proven the effectiveness of this combination. In India and Indonesia, the Government has built a pilot legal framework that allows fintech companies to cooperate with banks and provide financial services to small businesses in isolated areas.

However, Kiên noted, the biggest obstacle for the development of the model is that the legal framework is not streamlined to protect both credit providers and borrowers. Therefore, the Government should create a flexible and transparent legal corridor in order to create a sustainable development environment for fintech. — VNS