Vietnam's ratio of sales on credit higher than Asian average

By Tat Dat July 21, 2022 | 06:17 pm PT

An employee counts Vietnamese banknotes at a bank in Hanoi. Photo by VnExpress/Giang Huy

Nearly half of the total value of sales on credit remained unpaid at the due date and another 6 percent is written off as bad debts, a survey of businesses has found.

Trade credit insurer Atradius surveyed 200 businesses, who said they transacted an average of 58 percent of their business-to-business sales on credit, and the figure is on the rise, driven by loyalty and lack of liquidity.

But 48 percent of this is overdue invoice, and another 6 percent are uncollectible, they said.

Nearly half said their days sales outstanding (the average number of days it takes for a company to collect payment for a sale) rate is worsening.

Customers defaulted mainly due to liquidity issues (70 percent of the respondents said), especially in the textile/clothing and consumer durables industries; and administrative inefficiencies (52 percent of the respondents said), particularly in the agri-food industry.

Another reason cited was intentional late payment for various reasons, chiefly in the textile/clothing and chemicals industries.

Speaking to VnExpress, Atradius director for Vietnam, Vu Thi Duc Hanh, said sales on credit are not uncommon and firms should be adaptive to protect themselves.

Vietnam's ratio of sales on credit is higher than the Asian average, but its overdue and bad debts are lower, according to Atradius data.

This is the first time Atradius conducted its payment practices barometer in Vietnam.