P2P lending under scrutiny
P2P lending under scrutiny
Despite welcoming new business models, Deputy Prime Minister Vuong Dinh Hue has requested the relevant ministries and agencies to enhance control over peer-to-peer (P2P) lending and handle violations strictly, the Government news website reported.
At a meeting on P2P lending on March 6, the deputy prime minister ordered an assessment of the operations of 40 enterprises providing P2P lending services in Vietnam and assigned the State Bank of Vietnam (SBV) to map out regulations on the risk management of this lending model as well as on inspections and responsibilities of the relevant ministries and agencies.
He confirmed that the State will hand down harsh punishment to those caught taking advantage of this lending model to earn a profit. He cited the 2010 Law on Credit Institutions to say that individuals and organizations other than credit institutions are prohibited from conducting banking operations, except for making deposits or purchasing and selling securities of securities companies.
P2P lending is the practice of lending money to individuals or businesses through online platforms instead of official financial entities. P2P lending firms launch online platforms to connect borrowers with lenders.
This lending model has developed rapidly since it was first introduced in the United Kingdom in 2005. In Vietnam, the model appeared two years ago, but the State has yet to issue regulations on the management of P2P lending activities.
According to Nguyen Chi Quang, deputy director of SBV’s Monetary Policy Department, if P2P lending is managed well, it will contribute to boosting the finance sector, particularly in areas where residents, household businesses and small and medium enterprises find it hard to access financial and banking services with low costs and simple procedures.
However, this lending model has created fertile ground for violations, such as swindling; offering loans impulsively, leading to bad debts; and illegal payment intermediaries, SBV Deputy Governor Nguyen Kim Anh remarked, adding that P2P lending has crashed in China and several Southeast Asian countries.
When the Chinese Government tightens control over P2P lending, service providers tend to flow to other countries, including Vietnam.
Some P2P lending firms operating in Vietnam have violated banking and credit regulations, Anh said, proposing that the Government bar financial institutions from using the P2P lending model and P2P lending firms from mobilizing capital for lending.
At the meeting, representatives of the Ministries of Science and Technology, Planning and Investment, Information and Communications, Finance, and Justice agreed that a legal framework is needed for P2P lending management.
