Business - November 10, 2021 | 06:00 pm PT

According to the State Bank of Vietnam, in 2020, the outstanding consumer credit balance reached a relatively high level of VND1.8 million billion, accounting for 20 percent of outstanding loans to the economy.

For consumer finance businesses, outstanding loans reached VND130,000 billion, serving more than 30 million customers, a significant number for the fledgling domestic consumer finance market.

For years, the system of credit institutions and consumer finance companies has thrived to keep up with the increasing demand for capital. As a pioneer of Vietnam’s consumer finance industry, FE Credit has laid a foundation for the domestic market.

After more than a decade, the company currently accounts for nearly 50 percent of Vietnam's consumer lending market share with more than 12 million customers, 21,000 points of sale nationwide, and 16,000 strategic partners. FE Credit has contributed to career development opportunities and stable lives for more than 13,000 employees. By the end of 2020, the company’s total outstanding loans had reached VND66,000 billion.

Established in 2010, formerly known as the Consumer Credit Division of VP Bank, FE Credit then split into a finance company in 2014, with charter capital of VND1,000 billion. FE Credit has specialized in unsecured lending for low-middle-income labors, a segment many companies ignored due to fear of risk.

In 2015, while the financial business model offering consumer lending services was unfamiliar to Vietnamese customers, FE Credit took strategic steps by operating under an independent legal entity.

With the mission "Realizing dreams" and "Bringing Vietnamese people better lives", the company has overcome barriers, prejudice and misunderstandings. Gradually affirming its leading position in Vietnam’s financial market, FE Credit has become a "cash cow" of VPBank. In 2016-2017, FE Credit contributed over 40 percent to its parent bank’s profit.

In 2020, FE Credit reached operating income of more than VND18,200 billion, with net interest income of over VND17,200 billion. Profit before tax was more than VND3,700 billion.

As of Dec. 31, 2020 the company's total assets were valued at VND73,300 billion. The company mainly offers cash loans, loans to buy mobile phones, motorbikes, installment loans and credit cards.

By helping customers access modest loans, solving their financial difficulties, FE Credit aims at improving the quality of life among millions of Vietnamese.

"Besides, we have contributed to changing consumption habits and perception. Over the past 11 years, through many obstacles and prejudice, we have reached tens of millions, enabling them to access loans they might have had to rely on usuries before," shared FE Credit's CEO, Kalidas Ghose.

On April 28, VPBank’s completion of stake sale of FE Credit warmed up the domestic financial market. Six months since VPBank and SMBCCF signed the capital transfer agreement, both parties have completed all necessary steps and procedures to allow SMBCCF to officially become a major shareholder by acquiring a 49 percent stake in FE Credit.

Vietnam Prosperity Bank Finance Company Limited also changed its name to VPBank SMBC Finance Company Limited. The deal is expected to bring positive changes to Vietnam's consumer finance market.

SMBCCF belongs to Sumitomo Mitsui, a leading financial group in Japan with extensive experience in consumer finance, financial digital technology in Asia.

Ghose hopes FE Credit would benefit from SMBCFC’s technology support as well as capital, governance capacity and experience in consumer finance in Asia.

In addition, with the acceleration of technology investment and the reduction of capital mobilization costs, FE Credit's customers will soon experience diversified products and services with competitive interest rates and excellent quality to Japanese standards. The cooperation also promotes a healthy and transparent consumer financial market.

"The support of a global financial institution will also equip FE Credit, VPBank with experience in governance, network, and resources to prepare for powerful digital transformation and integration," the CEO stressed.

By the end of 2020, the total outstanding loans for living purposes and consumer loans in Vietnam reached VND1.85 million billion, an increase of 10.15 percent compared to the end of 2019, and more than tenfold in comparison to the end of 2010. The proportion of outstanding loans for living needs and consumer loans increased from 8.17 percent of the total outstanding loans in 2010 to 20 percent in 2020.

According to Ghose, Vietnam has great potential for consumer credit development. "Compared to some Southeast Asian countries like Indonesia, this figure is still quite modest. However, Vietnam has a young population, and many people join the labor force every year. Furthermore, people's income has increased sustainably."

The CEO of FE Credit stated the cooperation with Japanese partners brings more opportunities for future development. FE Credit also has the opportunity to access the Japanese market, learning from its global banking expertise.

"There is still a lot of things to be done, including enhancing trust for shareholders and promoting consumer loans in the future," Ghose affirmed.

"For nearly two years, enterprises have been heavily affected by the Covid-19 pandemic, posing a big challenge for the consumer lending industry and for people with moderate to low incomes. This affects FE Credit's loan portfolio, but accelerates transformation to meet increasing demand for consumer loans, helping people rebuild livelihood post-lockdown, as well as adopt well to the consumer trends," the CEO added.

During the pandemic, the company focused on digitizing operations with online platforms. FE Credit has applied software to human resource management, which simplifies the process, reduces costs and task execution time.

Customer service procedures have been digitalized. FE Credit’s system can now handle approximately 10,000 incoming calls per day and 5,000 emails, chats and social media sessions, as well as automate almost all outgoing calls.

With technology, the loan approval process only takes a few days, even hours, instead of several weeks as before.

FE Credit has also successfully implemented a multitasking sales model through cooperation with large retail chains, taking advantage of the sales force from its partners. The entire sales process, including documentation, electronic contract period, appraisal, loan approval... is completely digitalized, secure and synchronized.

By applying a multitasking sales model, the company saved 70 percent of sales costs, and revenue increased by 170 percent after three months of implementation. Currently, the model is helping the business reduce total costs by 28 percent and the majority of work load for employees.

According to the CEO of FE Credit, the "new normal" status has put low-income laborers under financial pressure with urgent spending needs. Lacking information and knowledge about consumer lending, especially in rural areas, many people easily find usuries to cover expenses.

"As a market leader in consumer lending, we understand our role in the fight against usury. In the event of our 11th anniversary, we keep pursuing the mission of developing a sustainable and transparent consumer financial market," added Ghose.

FE Credit has launched several preferential consumer lending programs with reasonable interest rates, simple procedures and flexible forms to enable customers to access loans easily and safely post lockdown, contribute to the fight against usury.

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