Is the financial leasing market "forgotten"?

(Chinhphu.vn) - Vietnam's financial leasing market is "too small compared to its potential" and is being "neglected". It is necessary to remove barriers and perfect the legal framework to develop this medium and long-term capital channel.

Opinions agree that financial leasing activities in Vietnam are currently very small in scale compared to their potential - Photo: VGP/HT

Small scale compared to potential

At the seminar on financial leasing activities held today, August 13, Dr. Pham Xuan Hoe, General Secretary of the Vietnam Financial Leasing Association, commented that financial leasing activities in Vietnam are currently very small in scale compared to their potential and have not received due attention.

This type appeared in Vietnam since 1992, at its peak there were 11 companies operating, but now there are only 9 companies (8 companies are operating, 1 company is restructuring). The total outstanding debt of the whole industry is about 47,000 billion VND, accounting for only 0.28% of the total outstanding credit of the economy . The number of leasing contracts is only about 15,000, equivalent to 1.5% of the number of enterprises and much lower if including 5.2 million business households.

Meanwhile, in Japan, South Korea or Taiwan (China), the rate of small and medium enterprises using financial leasing services is up to 70-80%. The advantage of this service is the ability to accept higher risks than commercial banks, meeting well the medium and long-term capital needs not only for machinery, equipment, means of transport but also intangible assets such as software, copyright, technology infrastructure, and exploitation licenses.

Dr. Pham Xuan Hoe added that Vietnam's economy grows at 5-7%/year, leading to a huge demand for medium and long-term investment capital. Currently, Vietnam has nearly 1 million enterprises and more than 5 million business households, so the need for innovation in machinery, production lines, medical equipment, means of transport, etc. is very high.

Four trends open up opportunities

Mr. Hoe pointed out four major trends that create room for financial leasing development: The demand for medium and long-term capital increases with economic growth; The demand for machinery and equipment in many fields, especially private healthcare with about 400 hospitals and 50,000 clinics; The trend of investing in green equipment and digital equipment to serve digital transformation, green transformation and sustainable development; The popularity of operating leases with payments based on time of use, meeting the flexible needs of businesses and consumers.

However, the average growth rate of the industry over the past 4 years has only reached 14.7%/year, equivalent to the general credit growth rate. The scale is small, the accompanying services are not yet developed, the bad debt ratio is below 3% but according to Mr. Hoe, this level does not reflect the true risk characteristics (should be at 5-6% as per international practice).

Policy breakthroughs needed Mr. Hoe assessed that the "quad" of Resolutions 57, 59, 66 and 68 will create breakthroughs for this sector. Specifically, Resolution 57 will help expand the portfolio of rental assets; Resolution 68 will improve the legal corridor; Resolution 59 will promote international cooperation, linking with foreign banks and companies and Resolution 66 will reform policy thinking.

Mr. JinChang Lai, Chief Expert of the International Finance Group, said that the minimum capital requirement of 24 million USD for a financial leasing company in Vietnam is too high compared to Indonesia (6 million USD). A 5-year roadmap should be applied to reach this level, while allowing the issuance of bonds secured by lease receivables and taking advantage of the real estate market to reduce capital costs. He also emphasized that many countries have their own laws or clear regulations in the Civil/Commercial Code, helping to determine legal relationships, ownership rights and bankruptcy handling mechanisms - something that Vietnam currently lacks.

According to Dr. Pham Xuan Hoe, some new regulations in Circular 26/2023/TT-NHNN have partially resolved them, such as removing credit limits for financial leasing companies, allowing working capital loans, approving electronic contracts under VND 500 million... However, there are still limitations such as the electronic approval limit being too low, the regulation on reporting related customers at 0.5% of equity capital causing difficulties.

A representative of VietinBank Leasing Company Limited (VietinBank Leasing) said that Circular 26 has created more clarity for financial leasing activities, but it is still necessary to expand the asset portfolio, especially aircraft and passenger ships, and have a capital syndication mechanism similar to banks. The company proposed to build a transparent valuation policy, a mechanism to encourage private enterprises to access services and incentives to reduce competitive disadvantages compared to banks.

"With the change in management thinking and determination to implement by the authorities, financial leasing will be "awakened", becoming an important capital channel for small and medium enterprises and business households, contributing to promoting sustainable economic growth," Dr. Pham Xuan Hoe expressed his hope.

Mr. Hoe proposed expanding the list of leased assets to include ships, passenger aircraft, digital assets, software, copyrights, mining licenses, prefabricated steel buildings, etc. Increase the electronic approval level from 500 million to 1 billion VND. Amend Circular 79 to allow vehicle registration according to the lessee's address, connect data to revoke vehicle badges. Add the right to seize assets and tax and fee incentives similar to banks.

Huy Thang

Source: https://baochinhphu.vn/co-phai-thi-truong-cho-thue-tai-chinh-bi-bo-quen-102250813153724827.htm