Vietnam’s dynamic $6 billion consumer finance market presents multiple opportunities for loan businesses. However, a new law enacted in January 2024 has raised questions about the country’s ongoing attractiveness for fintech startups.
MD Finance’s new report on Vietnam takes a close look at legislative changes and the state of the country’s consumer finance market in 2024.
Download the report or keep reading for a summary of key insights.
Economic background
Vietnam’s economy has enjoyed steady growth at 2.5 to 3.5% over three decades, making it one of the fastest-growing economies in Southeast Asia.
In 2023, the nation’s GDP was $433 billion, making it the world’s 35th-largest economy. GDP growth stood at an impressive 6.5%.
The International Monetary Fund (IMF) forecasts 6% growth in Vietnam’s economy in 2024.
This bright economic outlook relies on the country’s strong performance in recent years, ambitious development goals, and favorable demographics. Vietnam’s growing population borders 100 million, with an average age of just 32.5. Unemployment is low at 2.24%, and around 78% of the population are internet users, making Vietnam an attractive market for online services.
Fintech market
Statistics highlight lucrative opportunities in Vietnam’s fintech market.
Despite its rapid development, Vietnam still has a strikingly high under- and unbanked population, estimated at 54%. This is partly due to strong fintech NBFI growth.
There was a 215% rise in the number of fintech startups between 2015 and 2020.
In 2023, the Vietnamese fintech sector attracted foreign direct investments (FDI) of $23.2 billion, with three companies (MoMo, VNPay, and VNLife) becoming unicorns.
While Vietnam’s fintech sector is represented by 230 operators, penetration of digital payment services in the country remains low (around 36% of the population), indicating considerable room for growth. Non-cash payments reached $11 billion by the end of 2023.
Overall, robust growth in the sector has been driven by foreign funding and relatively lax regulations which have been tightened by the recent new Law on Credit Institutions.
Consumer finance market
Vietnam’s consumer finance market is regulated by the State Bank of Vietnam and the Ministry of Finance. Its value is estimated at $6 billion, with P2P lending accounting for $1 billion. Consumer loans are provided by
Banks
Foreign bank branches
Non-bank credit institutions (finance companies, leasing companies)
Micro-finance institutions
Representative offices of bank and non-bank lenders
Annual interest rates are significantly higher than those seen in developed nations. In major lending businesses, they range from 7-8% to 30-35%, with rates of 40-50% not uncommon in microfinance institutions.
The New Law on Credit Institutions
Vietnam’s New Law on Credit Institutions No. 32/2024/QH15 (“Law on Credit Institutions 2024”) significantly tightens the country’s regulatory financial framework.
The law, ratified on January 18, 2024, came into effect on July 1, 2024, with exceptions taking effect from January 1, 2025.
Praised by the IMF, the new law is expected to strengthen supervision and governance of the financial market.
The New Law, which mainly targets non-bank lenders, introduces the following changes:
Stricter licensing requirements: New standards for capital adequacy, management qualifications, and operational procedures for companies willing to obtain or retain their licenses
Enhanced regulatory oversight: Introduction of regular audits, inspections, and new reporting requirements
Interest rate caps: New interest rate caps to prevent usurious lending practices
Consumer protection: New requirements for non-bank lenders to provide clear and transparent information about loan terms, fees, and interest rates
Capital requirements: Increased capital requirements for banks and NBFIs
Risk management: New practices that lenders should adopt for credit risk assessment, management of non-performing loans, and maintaining adequate liquidity
Data privacy and security: Requirements for non-bank lenders to adopt advanced data protection measures
Penalties and enforcement: Increased penalties for non-compliance
The new law has had repercussions for investors in the country. Latvian peer-to-peer lenders VIA SMS Group and TWINO Group permanently ceased operations in Vietnam following its enactment, and punishments for violations have risen.
Opportunities and challenges
Despite a tightening regulatory framework, the Vietnamese market offers many advantages that make it attractive for new players:
Large market size
Considerable unmet demand: low penetration of digital peer-to-peer lending and its robust growth over the past years
High growth potential
High interest rates
Easy access to foreign investment
Less stringent regulatory framework compared to developed nations
The major challenges faced by companies entering the Vietnamese market are
A high rate of cybercrime, which necessitates strong cybersecurity
Inconsistent financial reporting, which makes it hard to evaluate the smaller fintech segment
Cultural and operational differences
Market data shows considerable growth opportunities for new players that adopt aggressive customer acquisition strategies. Furthermore, some larger players are struggling.
Top loan companies
The largest loan companies in Vietnam ranked by net interest income in 2022 are
FE Credit: VND16,000 billion ($640 million)
Home Credit: VND6,600 billion ($264 million)
Mcredit: VND5,100 billion ($204 million)
HD SAISON: VND4,600 billion ($184 million)
Mirae Asset: VND2,600 billion ($104 million)
Shinhan: VND2,350 billion ($94 million)
SHBankFinance: VND1,400 billion ($56 million)
Viet Credit: VND1,315 billion ($52.6 million)
Easy Credit: VND919 billion ($36.8 million)
JACSS: VND820 billion ($32.8 million)
Lotte Finance: VND450 billion ($18 million)
In 2022, all these companies enjoyed healthy year-to-year growth. The fastest-growing company was MCredit, which expanded its business by 59%.
By net income after tax, the loan companies rank as follows:
Home Credit: VND1,200 billion ($48 million)
Mcredit: VND960 billion ($38.4 million)
HD SAISON: VND920 billion ($36.8 million)
Easy Credit: VND366 billion ($14.6 million)
Shinhan: VND250 billion ($10 million)
Mirae Asset: VND123 billion ($4.9 million)
JACSS: VND68 billion ($2.7 million)
Viet Credit: VND63 billion ($2.5 million)
SHBankFinance: VND-105 billion (-$4.2 million)
Lotte Finance: VND-275 billion (-$11 million)
FE Credit: VND-2,400 billion (-$96 million)
Openings for agile players
Easy Credit ranked fourth in after-tax income despite being one of the smallest operators on the list. For 2023, the company reported VND709 billion ($28.4 million) of net interest income and VND328 billion ($13.1 million) of net income after tax. Despite a slump in net income, Easy Credit's significant profits indicate that small but agile players might have an advantage in this market.
The largest company, FE Credit, reported a net loss in 2022, followed by an even larger net loss of VND3,000 billion ($120 million) in 2023. As the market leader struggles, its share might be taken by smaller but fast-growing companies.
Cheat sheet: Opening a fintech loan business in Vietnam
Overall, Vietnam is a welcoming location for foreign investments, yet you’ll still need to follow certain procedures to open a fintech loan company in Vietnam.
Check if you meet the legal requirements.
Fintech companies in Vietnam are required to have a minimum charter capital of VND50 billion (about $2.2 million) and meet certain personnel and technical requirements under the new law.
2. Apply for an Enterprise Registration Certificate (ERC).
All new business entities in Vietnam should obtain the ERC should obtain the ERC. Submit your application to the Business Registration Office of the Department of Planning and Investment in the province where you intend to establish your office. You’ll usually receive the ERC within 3-5 business days.
3. Apply for an Intermediary Payment Service (IPS) license.
After getting the ERC, all non-bank lending businesses require an IPS license, obtainable from the State Bank of Vietnam. You will normally receive the license within 60 days, but in some cases, it might take longer.
Congratulations! You are set up and can start lending money to Vietnamese customers.
Key takeaways: Entering Vietnam as a fintech business
Despite recently tightened regulations, Vietnam remains a highly attractive market for loan businesses.
With its healthy economic outlook, large population, and considerable unmet demand for digital peer-to-peer lending, Vietnam can deliver robust growth to fintech players willing to comply with the country’s New Law on Credit Institutions.
You can still command higher interest rates than in developed nations if you adhere to the national cap.
Download the MD Finance report to see the full data on Vietnam’s lending market.
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