Despite accounting for over 20 percent of the total outstanding debt in the economy, consumer credit in Vietnam still has significant room for growth. The proposal to raise the loan limit for small-value loans to VND400 million (US$15,227) and abolish the requirement for a feasible capital utilization plan is considered a "breath of fresh air," helping people easily access legitimate capital and combat illegal lending.
Loan limits increased fourfold
The above proposal is one of the noteworthy contents in the draft amendment to Circular 39/2016 regulating lending activities of credit institutions and branches of foreign banks to customers, which the State Bank of Vietnam is currently seeking opinions on.
Accordingly, the State Bank of Vietnam proposes increasing the loan limit for small-value loans fourfold, from VND100 million to a maximum of VND400 million for credit institutions; plus, the bank proposes abolishing the VND100 million loan limit for online consumer loans. Empowering credit institutions to make decisions based on risk and technological capabilities.
The shift to eKYC (electronic identity verification) and biometric authentication not only allows people to disburse funds from home but also serves as a strict shield to ensure system security,” a representative of the drafting committee said. In particular, customers are no longer required to provide a feasible plan for using the capital - a barrier that previously deterred many individuals and households from accessing bank loans. Instead, borrowers only need to provide information on the legitimate purpose of using the capital and demonstrate their financial ability to repay the debt.
A representative of the State Bank of Vietnam noted that with rising living costs and growing demand for goods and services, borrowing needs now often exceed VND100 million. As a result, the current cap no longer reflects the realities of borrowers or the rapid development of financial technology. Expanding lending through online platforms is seen as an inevitable step in the banking sector’s digital transformation, while raising the ceiling is also necessary to align with the Law on Credit Institutions 2024.
Driving domestic consumption growth
Domestic consumption spending is increasingly becoming one of the important drivers of economic growth. Expanding consumer credit in a reasonable way not only helps people access capital more easily but also contributes to boosting domestic demand and supporting the activities of many economic sectors. Data from the State Bank of Vietnam also shows that outstanding consumer loans currently reach about VND3 trillion, accounting for more than 20 percent of the total outstanding loans in the economy.
A leader of a commercial bank in Ho Chi Minh City shared that the demand for consumer loans is currently very high, but in reality, for small loans, the cost of assessing the "feasibility of the plan" is sometimes higher than the profit from that loan. Relaxing procedures allows banks to access the individual customer segment faster, especially supporting workers who need capital urgently to cover living expenses, preventing them from resorting to illegal lending due to too complicated procedures.
According to economic experts, there needs to be synchronization of population data. Deeply connecting credit institutions with national population data will be the "key" to both speeding up approvals and controlling the risk of policy abuse.
Tien Phat, General Director of ACB, also believes that the proposal to raise the consumer loan limit to VND400 million is a significant improvement in the process. The key point lies in shifting from manual appraisal to loan approval based on the customer's creditworthiness and transaction history, instead of relying solely on rigid paper documents. This proposal opens up great opportunities for individuals with good credit history, helping them access larger amounts of capital to meet their living needs.
Regarding the question of systemic risk, ACB leaders believe that with current data-driven control capabilities, raising the limit will bring positive synergistic value to both borrowers and banks without increasing the pressure of bad debt.
Finance expert Huynh Trung Minh described the proposal to raise loan limits without requiring proof of purpose as a groundbreaking move, giving banks greater competitiveness and access to a wider customer base. He cautioned, however, that while procedural barriers have been lifted, challenges remain in ensuring borrower responsibility and strengthening personal financial management skills to guarantee effective loan use and the sustainable growth of the credit system.
