Vietnam consumer credit enters new growth cycle

After the decrease in consumer capital demand, negative growth, and peaking bad debts in 2023, Vietnam’s consumer financial market is entering a new growth cycle, backed by positive signs from the macroeconomic environment.

Rising from the bottom

In 2023, the global economy was bleak following the post-Covid period and various instabilities such as geopolitical conflicts. Domestically, overall demand and investment declined; and exchange rates and interest rates fluctuated unpredictably, affecting consumers' lives.

This led to tighter spending. Many organizations and individuals did not take out new loans for business expansion. However, in 2024, things improved significantly when the government implemented credit support packages for industries and sectors, reduced VAT on some goods and services, and issued new legal documents.

A report on Vietnam’s 2024 economic performance and forecasts for 2025, recently published by BIDV Training and Research Institute, showed that consumer spending continued to recover, with retail sales of goods and services in 2024 increasing by 8.8%, driven by a surge in tourism and the recovery of personal consumption.

In major cities like Hanoi and Ho Chi Minh City, consumer credit lending surged. At the end of October 2024, the total consumer credit balance in HCMC hit over VND1 trillion ($39.12 million), up 6.3% compared to the end of 2023 and 12% year-over-year.

The State Bank of Vietnam's report indicated that by mid-2024, the total lending balance for living expenses and consumer loans in Vietnam had approximated VND2.9 trillion ($113.44 million), accounting for 20% of the total credit balance in the economy and showing an increasing trend over the years. The number of credit institutions offering products and services for consumer lending is also rising.

Statistics also showed that the average growth rate of loans for living expenses and consumption since 2010 has consistently outpaced the overall credit growth rate of the economy.

New growth era

Experts predicted that in 2025, the consumer finance market will continue to experience new growth opportunities. Recently, the World Bank raised Vietnam's GDP growth forecast for this year to 6.6%, surpassing the Philippines (6.1%), Cambodia (5.5%), Indonesia (5.1%), and Thailand (2.9%). The improvement in household income will significantly boost consumer financial demand, it said.

Moreover, financial data firm FinGroup evaluated that Vietnam's consumer finance market still has great development potential, as consumer credit currently stands at just over 10% of GDP, much lower than in countries and territories like South Korea (over 40% of GDP) and Hong Kong (over 20%).

Additionally, specific government policies supporting and reforming the consumer finance sector will encourage borrowing demand. For loans under VND100 million ($3,912), customers no longer need to provide detailed capital usage plans. Instead, they only need to share basic information about the purpose of the loan and their repayment ability.

In light of these favorable conditions, credit institutions and consumer companies have proactively restructured, applying technology and digital transformation to anticipate a "wave" of new growth in the next phase.

For example, HCMC-based consumer loan provider Home Credit has digitized the entire lending process through investments in AI (artificial intelligence) and Big Data. Their mobile app, Home App, has been upgraded to provide a smooth experience, from instant loan approval to 24/7 chatbot support. The cash loan process on the app is optimized, taking only three minutes from approval to disbursement, providing a quick, convenient, and seamless experience for users.

Furthermore, to increase its presence across various fields, Home Credit’s Home PayLater has formed strategic partnerships with many large retailers and e-commerce platforms, making it an essential payment tool for modern consumers.

Alongside a comprehensive partnership agreement with The Gioi Di Dong (Mobile World), the recent cooperation between Home Credit and Be Group has introduced a new payment option to over 10 million BE users via Home PayLater.

In addition to advanced technological solutions, Home Credit listens to its customers more attentively and launches appealing promotions, including the national campaign "Tet Nha Vo Gia" (Invaluable home Tet) at the beginning of the new year.

Electronic transactions and top-up payments through Home App are offered at a 20% discount, up to VND50,000 (nearly $2). Customers using Home PayLater at supermarkets, convenience stores, cosmetics shops, and restaurants in January received a VND50,000 discount.

First-time QR code transactions and Home PayLater payments valued at VND150,000 or more also enjoys a VND50,000 discount. Additionally, customers purchasing electronics or accessories at The Gioi Di Dong and Dien May Xanh receive up to VND100,000 off until February 28.

With these favorable factors, along with credit scoring solutions that will be promoted by state regulatory agencies in the near future, experts predicted that the consumer loan market will soon move past the "dark" profit zone and enter a new growth cycle, confidently advancing into a new era of development alongside the country.