HCM City (VNS/VNA) - With peer-to-peer lending becomingincreasingly popular in Vietnam, experts said a legal framework is needed toregulate the activity to prevent loan-sharking.

Since last year P2P lending, which involves lending to individuals andbusinesses by matching lenders and borrowers, is accelerating in Vietnam witharound 40 online lending companies springing up.

One of the most well-known is Tima Group Joint Stock Company, which wasestablished in 2015.

Lenders and borrowers have to register on the Tima system and download anapp to find a lender or borrower nearby to negotiate loan amount, interest rateand loan tenor.

Both parties have to pay the service provider a fee of 15,000-25,000 VND.

Tima’s recent customers are from all parts of the country.

The loan amounts run from 3 million VND (130 USD) to as much as 90 millionVND (3,860 USD).

The platform has around 4.8 million loan applicants, more than 3 millionborrowers and 32,000 lenders, and total disbursement has been nearly 61.8trillion VND.

Lendbiz also uses this model but its borrowers are companies and householdbusinesses.

To borrow money from Lendbiz, businesses have to be located in majorcities and should have been around for at least one year and show positivegrowth.

Many P2P lending service providers announce interest rates of 1.2-1.5 percentper month on their websites, equivalent to 18 percent per year, but in fact therates are much higher.

For instance, a borrower logging into Doctordong for a loan of 10 million VNDends up paying back 13.91 million VND after 30 days (equivalent to an interestrate of 39.1 percent a month). The website now has nearly 6.8 millionregistered customers.

According to the Bank for Investment and Development of Vietnam ResearchCenter, the global P2P lending market was worth 1.2 billion USD in 2012. Thefigure went up to 64 billion USD three years later and is forecast to reach 1trillion USD by 2025.

Peer lending in Vietnam has developed rapidly due to the lack of easyaccess to financial services. According to the World Bank, only 40 percent ofVietnamese adults have a bank account.

But experts warn this rapid increase in P2P lending might lead to the riseof loan-sharking.

According to Can Van Luc, chief economist of BIDV and director of the BIDVTraining School, like many other developing countries, Vietnam does not have alegal framework for peer lending yet.

Companies operating in this field often register as an investmentconsulting firm and lending is still unregulated, he said.

Therefore, this activity has many potential economic and social risks, headded.

Concerns have been sparked by what has been happening in China, where P2Plending has been growing rapidly.

Since the beginning of 2011 the service there has attracted around 50million people and interest rates are 10 per cent a year or more (double thebank lending rates), and transactions were worth nearly 218 billion USD as ofthe middle of last year.

However, due to the lack of regulations, in mid-2018 many companiesresorted to illegal activities.

It resulted in 400 companies going bankrupt. Some company owners fled withinvestors’ money. After that China took a number of measures to regulate P2Plending.

In Vietnam, the Government has instructed the Ministry of Planning andInvestment to draft a plan for the sharing economy model.

Three sharing economy models have seen strong growth in the country,including car-hailing, room sharing and peer-to-peer lending.-VNS/VNA