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Banks find few takers for consumer loans   2009-03-02 - VietNamNet/VNS

Although several commercial banks have resumed providing loans for individuals, borrowers have not been materialising.

According to analysts, with the current economic downturn, residents are afraid that they will be unable to repay the loans and so hesitate to apply for one.

And though banks have simplified the loan procedures, customers still must present many certified documents. This also contributes to consumers’ hesitancy.

Moreover, a large concern contributing to the hesitancey involves interest rates.

Many banks calculate interest rates on the original principal for the entire duration of the loan, and not on the reduced amount after repayment. Therefore, borrowers feel disadvantaged.

Furthermore, since repayment on most consumer loans lasts for several years, the interest rate may fluctuate. So customers worry they may have to pay higher interest rates in the future.

ACB Bank General Director Ly Xuan Hai says the interest on consumer loans was higher than the interest cap set for enterprises. The result is that individuals are not seeking consumer loans, he says.

Though banks want to increase the number of consumer loans, they concede that consumer lending still carries many risks, especially unsecured credit.

However, Lien Viet Bank General Director Nguyen Duc Huong says: "Banks could still boost consumer loans if they applied proper and strict regulations despite the risks of unsecured lending."

Several commercial banks consider developing consumer credit as one of the main goals for this year. They have set aside thousands of billions of dong for personal lending.

Sai Gon Ha Noi Commercial Joint Stock Bank, for instance, will lend up to VND300 million ($17,100) for individuals to buy or repair houses, buy autos and for other consumer purposes for four years without collateral.

The Lien Viet Bank has announced that managers and staff of institutions and enterprises can borrow up to VND500 million for 36 months without mortgaged assets or guarantees from their companies.

Asia Commercial Bank is offering loans against collateral for housing for terms of 10 – 15 years and for terms of up to seven years for building and repairing houses.

The Viet Nam Export Import Commercial Joint Stock Bank (Eximbank) has announced that it will earmark VND3.7 trillion ($211.4 million) for consumer loans.

It will lend up to VND500 million to individual customers with a stable income and collateral.

Techcombank, Sacombank, and DongA Bank have also announced plans to quicken personal lending.

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