Peer to peer, or P2P, lending has been developing rapidly around the world in recent years with the establishment of many online lending companies, experts have said.

P2P lending is the practice of lending money to individuals or businesses through online services that match lenders with borrowers.

Lending amounts are usually small, with the lending term between one month and two years, Luu Tuong Bach, deputy director of MIG Holdings, said.

Talking about the advantages of the P2P model, he said credit approvals and loan processes are quicker and more efficient since they are done online and on mobile devices, while the use of artificial intelligence and big data ensures better high risk management.

Through this model, lenders can earn higher returns than from banks while borrowers can get money at lower rates, he said.

But there are also disadvantages of P2P lending, he said, pointing to the risk of payment default since it does not require any collateral.

Besides, P2P lending is fertile ground for high-tech crimes, he admitted.

According to the World Bank, 79 per cent of Viet Nam’s population cannot access official financial services.

Many financial technology (fintech) companies have been set up in the P2P area in Viet Nam such as Tima, which focuses on individual customers, and Lendbiz, which focuses on small- and medium-sized enterprises.

On Wednesday, a new company called Megalend Viet Nam Investment and Trading Corporation made its debut in HCM City with a chartered capital of VND5 billion (US$214,480).

It has a P2P lending platform targeted at SMEs, start-up enterprises, especially those in high-tech agriculture, and households.

Speaking at the launch, Bach, who is also chairman of Megalend Viet Nam, said, “Megalend Viet Nam targets to become one of the largest P2P lending platforms in Viet Nam in the next three years.”

For many experts, in Viet Nam P2P could replace usurious illegal moneylenders.

But they said there is still no legal framework for the business model and said the Government needs to soon create one. — VNS