Economist points out challenges in Vietnam's personal financial market

There remains a lack of competence when it comes to handling debt in Vietnam, with the proliferation of black credit serving as the most prominent example, according to economist Can Van Luc.

Market potential

Vietnam's population reached 98.51 million in 2021, of whom 50.5 million are 15 and older, according to the General Statistics Office. However, approximately half of the population did not have bank accounts.

Vietnam is a developing country with a thriving economy and rising per capita income. With a growing young population and rising affluence, the need for shopping, consumption, and personal financial services is on the rise.

State Bank of Vietnam (SBV) statistics show Vietnam has approximately 183 credit institutions and almost 1,200 public credit funds, 22 licensed financial firms, and four licensed microfinance institutions. Personal financial services development is an essential demand for the credit institution system in Vietnam and commercial banks in particular.

"SBV data also shows that since 2011, personal credit in Vietnam has been growing faster than corporate credit and general credit in the system," chief economist at BIDV bank Can Van Luc said at the forum "Development of the personal financial market in Vietnam" on Friday.

Le Minh Nghia, chairman of the Vietnam Financial Consultants Association (VFCA), told The Investor on the sidelines of the conference that the personal finance sector has enormous potential that it is still open and untouched. "If properly exploited, this sector will grow swiftly and become a powerful weapon in assisting the financial market to become healthier and more sustainable."

Nghia emphasized that Vietnam has 100 million people and a national personal finance development agenda. The issue is determining how to organize and develop this market.

Not caring about personal financial management

A small survey in Hanoi about individuals' interest in key areas of personal finance such as spending management, financial planning, insurance planning, investing, retirement, and wills revealed that Vietnamese people have little interest in personal finance, the forum heard.

Over 80% of those polled had no idea what personal finance was, and they were unconcerned about future planning. Only a small percentage of people who have studied, lived, or worked in industrialized nations like the U.S., the UK, or Australia, or who are employed in the financial industry, understood personal finance. They all said that they had only recently become interested in personal financial management.

More than 90% of people surveyed did not know their expenses in the past months, and they did not have savings to hedge against emergencies. Thus, basically, Vietnamese people still do not pay much attention to personal financial management. They have savings, as well as other investments, but do not have a specific savings plan and have not determined the appropriate level of risk for investment.

Challenges in personal financial sector

Luc of BIDV bank highlighted three major problems with personal financial management in Vietnam.

First off, there is still a lack of competence when it comes to handling debt, with the proliferation of black credit serving as the most prominent example. Secondly, there is still a lack of knowledge of personal financial management. The third is borrowing capacity. If you have repayment issues or take out quick loans without properly planning your payments, it is easy to run into financial difficulties.

Regarding challenges, Nghia of VFCA noted that consulting services in Vietnam remain underdeveloped. The standard of financial advisory services is concerning, resulting in several implications. While the financial market in Vietnam is quickly growing, training programs for financial advisors in Vietnam are lacking in formality and do not ensure adequate quality in accordance with international principles.

"Many consumers who seek investment advice are unfamiliar with the fundamentals of valuing investment assets, lending guidance, and bankruptcy risk management," he added.

Nguyen Tien Hoang, dean of the Finance and Banking Faculty at Van Lang University, argued that while there are numerous higher education institutions across the world that train in personal financial planning, there are none in Vietnam.

In response to the aforesaid opportunities, Van Lang University's Finance-Banking program will add a personal financial planning course to its existing majors of corporate finance, financial investment, risk management and insurance, banking, and digital finance.

Nghia pointed out that first and foremost, it is crucial to update thinking about how to inform people that personal financial planning is extremely important, not only for individuals but also for the entire family. Besides, Vietnam needs a solid legal foundation, meticulous planning, and close supervision of the implementation.