During the National Assembly’s latest question-and-answer session, Hanoi MK Pham Thi Thanh Mai asked Governor Hong to clarify the legal framework for P2P lending and business management.
P2P lending, or app lending, has become a hot issue after Hanoi police uncovered a case of app lending worth VND5 trillion, causing people heavy losses.
According to Hong, thanks to the development of information technology, many new products and services exist, including P2P lending. However, problems have arisen due to the lack of a legal framework.
In theory, P2P lending helps support financial outreach, increases capacity, and provides an additional channel to access financial resources, especially for disadvantaged groups. However, in reality, P2P lending carries many risks that can harm and destabilize social security.
Hong said SBV is drafting a government decree to manage and control the loans. In the coming times, the central bank will continue to cooperate with ministries and branches to issue a legal framework to regulate activities, including penalties for violators.
In May 2020, the Prime Minister tasked SBV to partner with ministries and directorates to design a pilot mechanism for managing P2P and other non-legalized payment methods.
Two years have passed, but the legal framework is still pending.
P2P lending awaits sandbox
After designing a sandbox for Mobile Money, the first sandbox in the field of Fintech in Vietnam, the public hoped that there would also be a sandbox applied to P2P loans.
Tima CEO Tran The Vinh said the state should create a legal framework with clear regulations on P2P lending to weed out disguised companies that cannot meet operating requirements.
Half of Vietnam’s population are young people of working age who have a high demand for financial services, but they face an obstacle when accessing formal finance, especially people living in rural areas.
There is great potential for the development of P2P lending. Additionally, the popularity of the Internet and smartphones has created opportunities for P2P lending to access customers in all geographies.
According to Vinh, there are many lending apps in the market that pose as P2P lending and conduct illegal lending activities, a type of black credit.
Apps trick users with easy online loans and simple procedures. However, interest rates on loans are exorbitant, causing many people to fall into insolvency. Borrowers then face illegal debt pursuit activities carried out by lenders, such as threats against borrowers and their relatives.
Tran Viet Vinh, chairman of Gomin Corp and CEO of Fiin Credit, said there should be a sandbox in banking for P2P lending. This would help prevent and curb illegal black credit, which unfairly takes advantage of the internet and P2P lending environment to provide loans at exorbitant interest rates and steal people’s assets.
In addition, a pilot mechanism would help mitigate unhealthy competition and prevent violations of laws by foreign individuals and institutions. These people, under the cover of Vietnamese companies, grant loans at exorbitant interest rates and wash away the dirty money.
The sandbox will help ensure cybersecurity and protect users’ data and benefits. It will also create favorable conditions for start-up innovations in the Fintech field.
Startups will have a legal framework to expand cooperation with financial institutions, credit institutions and investment funds. Thus, people could easily find companies operating in accordance with the laws and avoid pitfalls.
Le Minh Hai, CEO of Tienngay.vn, said the sandbox should be designed in a more open way to help P2P lending become popular among people and encourage innovative models that guarantee benefits for investors and borrowers.
He suggested a mechanism for sharing information on borrowers’ credit history with banks and financial securities in order to have better risk management policies.