Diversifying private sector funding sources may impact banks’ growth strategies. Photo: LE VU |
A shift in credit structure?
Among the tasks and solutions to develop the private sector, diversifying funding sources for private enterprises may influence banks’ growth strategies in the coming period. Specifically, prioritizing a portion of commercial credit for private enterprises, especially small and medium-sized enterprises (SMEs), supporting industries, startups, and green transitions, could alter banks’ credit targets. As a result, banks will face pressure to shift their outstanding loan structure towards SMEs by expanding credit limits for this segment, leading to a gradual shift in the credit structure towards retail segments.
In reality, the goal of boosting credit for SMEs has been frequently mentioned in recent years, but the results have not yet met expectations. According to the State Bank of Vietnam (SBV), as of the end of 2024, credit outstanding for private enterprises reached approximately VND 6,910 trillion, up 14.72% from 2023, accounting for 44% of the economy’s total credit outstanding. However, credit outstanding for SMEs stood at only VND 2,740 trillion, a mere 10.7% increase compared to the end of 2023, and accounted for just 17.6% of the economy’s total credit outstanding.
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As of the end of 2024, credit outstanding for private enterprises reached approximately VND 6,910 trillion, up 14.72% from 2023, accounting for 44% of the economy’s total credit outstanding. In contrast, credit outstanding for SMEs was only VND 2,740 trillion, a 10.7% increase from the previous year, making up just 17.6% of the total credit outstanding in the economy. |
Resolution 68 requires the state to support interest rates and encourage credit institutions to reduce lending rates for private enterprises implementing green, circular, and ESG-compliant projects. To achieve this, banks will need to manage capital costs more efficiently, increase fee income to compensate, and design green credit packages with appropriate capital costs.
Banks’ lending policies and risk appetite will also undergo certain changes. Specifically, Resolution 68 encourages financial and credit institutions to lend based on the assessment of production and business methods, market expansion plans, data-driven lending, cash flow, value chains, and the consideration of various types of collateral, including movable assets, intangible assets, and future assets, as well as unsecured lending.
This compels banks to invest in non-mortgage credit scoring models, leveraging artificial intelligence, machine learning, and big data for efficient data processing for customer credit scoring. Priority will be given to critical input data such as tax, POS payments, and e-invoices, necessitating increased cooperation and Open API integration with the General Department of Taxation and national payment gateways.
Resolution 68 also mentions a solution for interconnecting and sharing information between banking, tax, and relevant systems, ensuring seamless data exchange on enterprises’ operational and financial status, credit ratings, and assessments from credit institutions, financial funds, and third-party credit rating organizations to enhance lending to SMEs and households.
Increased competition
Banks may face heightened competition as Resolution 68 calls for the improvement of SME credit guarantee fund models and encourages the participation of financial institutions and large enterprises in guaranteeing SME loans. It also emphasizes the need to streamline the legal framework and operational mechanisms of the SME development fund by expanding the target audience, simplifying and digitizing conditions, procedures, and disbursement processes.
This will introduce a mechanism for co-guarantee and re-guarantee among credit institutions, reducing credit risk and sharing potential losses. To mitigate competition, banks may relax capital allocation criteria, actively participate in local SME guarantee and development funds, and explore strategic partnerships with FinTech companies in the P2P lending space.
Additionally, with legal frameworks for P2P lending and crowdfunding platforms connecting SMEs directly with individual and institutional lenders, as well as amendments to financial leasing laws, credit institutions will face intensified competition from FinTech companies. By collaborating with FinTech partners, banks can leverage their technology, microdata, and advanced credit risk assessment capabilities while also strategically investing in P2P lending platforms as a new business avenue.
Notably, Resolution 68 aims to expand financial services to 2 million businesses and households nationwide, especially in rural and remote areas, where 70% of micro-private enterprises currently lack access to bank credit. To achieve this goal, banks will need to develop agency banking models to extend their financial services reach, generating new fee income streams and valuable transaction data.
Essentially, the agency banking model enables banks to establish compact transaction points at grocery stores, post offices, and distribution networks of other enterprises, offering flexible operating hours and handling small-scale transactions such as deposits, withdrawals, transfers, bill payments, and e-wallet top-ups to meet the needs of SMEs and households. Banks can also experiment with cash-flow lending products and collect valuable customer transaction data.
Trieu Minh
– 16:00 05/23/2025
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“In order to foster private sector growth, Alpha Book’s Chairman, Nguyen Canh Binh, emphasizes the importance of intersecting the talents of individuals from both the private and public sectors. He believes that by intertwining the strengths and resources of these two realms, a robust and dynamic economy can be cultivated.”
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“Vietnam is set to prioritize the development of its private sector. With a renewed focus on fostering a vibrant and diverse economy, the country aims to unleash the potential of its private enterprises. This strategic shift marks a pivotal moment in Vietnam’s economic journey, signaling a departure from traditional models and embracing a future driven by innovation and entrepreneurial spirit.”
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