Deputy Prime Minister Vuong Dinh Hue has announced the government will soon issue a legal framework covering peer to peer lending (P2P) activities, aiming to prevent violations in this new form of business model, the governmental portal reported.
Deputy Prime Minister Vuong Dinh Hue at the meeting. Source: VGP.
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The government, however, would consider the participation of financial institutions in P2P lending in the future, Hue said in a meeting with government agencies on P2P lending activities on March 6.
According to Hue, people abusing the P2P lending are strictly punished under the 2010 Law on Credit Institutions, which provides “individuals and organizations other than credit institutions are prohibited from conducting banking operations, except escrow, purchase and sale of securities by securities companies.”
Hue said while Vietnam must quickly grasp opportunities emerged from new business models, any law violations during this process must be dealt with in accordance with law.
Vietnam currently does not have a specific law regulating P2P activities. There are now 40 P2P companies providing platform for money lending between users in the country.
Deputy Director of the Monetary Policy Department under the State Bank of Vietnam (SBV) Nguyen Chi Quang said if P2P lending is well managed, it would facilitate inclusive finance, especially in remote areas where the banking sector remains undeveloped and customers, household businesses, and small and medium enterprises having limited accessibility to banking – finance services with low costs.
However, in some countries, P2P lending activities have been capitalized on, causing disruption in social security and economy. Instead of being the intermediaries, P2P lending companies are using their platforms as a way of mobilizing capital with sky-high interest rates.
SBV’s Deputy Governor Nguyen Kim Anh said China and some countries in Southeast Asia have seen a sharp rise of such violations. When the Chinese government tightens control on P2P lending, these companies have moved their operations to other countries, including Vietnam, Anh said.
Among 40 P2P lending companies operating in Vietnam, 10 have Chinese origin, and the remaining from Indonesia and Singapore. Violations have been found during the operation of some of these companies, Anh added.
A research conducted by Transparency Market Research showed that P2P lending would grow by 48.2% annually in the 2016 – 2024 period, while Morgan Stanley forecast the business model is expected to reach growth rate of 53.5% globally by 2020.
