Hanoi (VNS/VNA) - Consumer financecompanies have been cutting credit growth to focus more on tighteninginternal governance and selecting solvent customers to target a safer andhealthier development.

Financial statements from major finance companiesshowed that credit growth had increased by only 4-5 percent in the first halfof this year, compared to double-digit growth in previous years, and even lowerthan in commercial banks.

At FE Credit, lending rose by only 3.54 percent inthe first half of 2018, even lower than the growth rate of 10.49 percent of itsparent company VPBank.

Ho Chi Minh Securities Company attributed FECredit’s credit growth slowdown mainly to the company’s change in lendingstructure. FE Credit has focused more on the traditional lending segment, whichhas lower risks, lower value and shorter terms, but higher competition.

The credit growth slowdown has causedprofitability to reduce significantly.

FE Credit’s  profit rose by only 16 percentto 1.58 trillion VND (67.23 million USD) in the first half of this year,accounting for only 36 percent of VP Bank’s total profit, down significantlyfrom 50 percent in the previous year.

Nguyen Duc Vinh, VP Bank’s General Director, saidthat the bank was planning to keep the growth rate low and reduce itscontribution to the bank’s consolidated profit.

According to experts, Vietnam’s consumer financemarket is still very attractive due to the large room for growth and highprofitability, but players in the market have decided to focus more onsustained growth for fears of tightened management from State agencies and baddebt risks.

The general move to lower credit growth follows aseries of scandals regarding debt collection, high interest rates orco-operation with cosmetics companies to ‘trap’ borrowers, which have damagedtheir reputations.

Finance companies are also concerned aboutincreasing bad debts without improvement in risk governance. At FE Credit, thebad debt ratio rose significantly to reach 6.43 percent of total outstandingloans by the end of June.

Nguyen Duc Kien, Deputy Chairman of the NationalAssembly’s Economic Committee, said that the slowdown was necessary to helpfinance companies develop and gain confidence from customers.

Banks themselves are also becoming more cautiouswith consumer lending. Techcombank has sold its financial company to foreigninvestors, saying that the bank didn’t have strategy to operate the riskybusiness. For consumer loans, Techcombank only provides housing or car loansbased on collateral.-VNS/VNA