How FE Credit Came to Dominate Vietnam’s Consumer Loan Market
Business – November 11, 2021 | 09:00 GMT + 7
According to the State Bank of Vietnam, in 2020, outstanding consumer loans reached a relatively high level of 1.8 trillion dong, accounting for 20% of outstanding loans to the economy.
For consumer credit companies, outstanding loans reached 130 trillion VND, serving more than 30 million customers, a significant number for the emerging domestic consumer credit market.
For years, the system of credit institutions and consumer finance companies flourished to meet the growing demand for capital. As a pioneer of the consumer credit industry in Vietnam, FE Credit laid the foundation for the domestic market.
After more than a decade, the company currently accounts for nearly 50% of the consumer loan market share in Vietnam with over 12 million customers, 21,000 outlets nationwide and 16,000 strategic partners. FE Credit has contributed to career development opportunities and life stability for over 13,000 employees. By the end of 2020, the company’s total outstanding loans had reached VND 66 trillion.
Founded in 2010, formerly known as the consumer credit division of VP Bank, FE Credit then split into a financial company in 2014, with a share capital of VND 1,000 billion. FE Credit specializes in unsecured loans for low- and middle-income workers, a segment overlooked by many companies for fear of risk.
In 2015, when the financial business model of offering consumer loan services was unfamiliar to Vietnamese clients, FE Credit took strategic steps by operating under an independent legal entity.
With the mission “Realize Dreams” and “Bring Vietnamese to a Better Life”, the company overcame barriers, prejudices and misunderstandings. Gradually asserting its leading position in the Vietnamese financial market, FE Credit has become a “cash cow” of VPBank. In 2016-2017, FE Credit contributed more than 40% to the profits of its parent bank.
In 2020, FE Credit achieved operating income of over VND 18,200 billion, with net interest income of over VND 17,200 billion. Profit before tax was over 3.7 trillion dong.
As of December 31, 2020, the company’s total assets were valued at VND 73.3 trillion. The company mainly offers cash loans, loans to buy cell phones, motorcycles, installment loans and credit cards.
By helping clients access small loans, solving their financial difficulties, FE Credit aims to improve the quality of life of millions of Vietnamese.
“In addition, we have helped to change consumption habits and perception. Over the past 11 years, through many obstacles and prejudices, we have reached tens of millions of people, enabling them to access loans that they might have had to depend on wear and tear before, ”FE explained. Credit CEO Kalidas Ghose.
On April 28, VPBank’s completion of the sale of FE Credit’s stake warmed the domestic financial market. Six months after VPBank and SMBCCF signed the capital transfer agreement, both parties have completed all the steps and procedures necessary to enable SMBCCF to officially become a major shareholder by acquiring a 49% stake in FE Credit.
Vietnam Prosperity Bank Finance Company Limited also changed its name to VPBank SMBC Finance Company Limited. The deal is expected to bring positive changes to the Vietnamese consumer credit market.
SMBCCF is owned by Sumitomo Mitsui, a leading financial group in Japan with extensive experience in consumer credit and digital financial technology in Asia.
Ghose hopes that FE Credit will benefit from the technological support of SMBCFC as well as the capital, governance capacity and experience in consumer credit in Asia.
In addition, with the acceleration of technological investments and the reduction in the costs of raising capital, clients of FE Credit will soon benefit from diversified products and services with competitive interest rates and excellent quality by Japanese standards. The cooperation also promotes a healthy and transparent consumer financial market.
“Support from a global financial institution will also equip FE Credit, VPBank with governance, network and resource experience to prepare for a powerful digital transformation and integration,” said the CEO.
At the end of 2020, the total outstanding subsistence loans and consumer loans in Vietnam reached VND 1.85 million, an increase of 10.15% compared to the end of 2019 and more than ten times compared to the end of 2010. The share of outstanding loans for housing and consumer loans rose from 8.17% of total loans in 2010 to 20% in 2020.
According to Ghose, Vietnam has great potential for the development of consumer credit. “Compared to some Southeast Asian countries like Indonesia, this figure is still quite small. However, Vietnam has a young population and many people join the workforce every year. In addition, people’s incomes have increased in a sustainable manner. “
The CEO of FE Credit said that the cooperation with Japanese partners offers more opportunities for future development. FE Credit also has the opportunity to access the Japanese market, drawing on its global banking expertise.
“There is still a lot to do, including building shareholder confidence and promoting consumer lending in the future,” Ghose said.
“For nearly two years, businesses have been hit hard by the Covid-19 pandemic, posing a significant challenge for the consumer loan industry and for people with modest to low incomes. This affects FE Credit’s loan portfolio, but accelerates transformation to meet growing demand. for consumer loans, helping people rebuild their livelihoods after the lockdown, as well as adapt well to consumer trends, ”the CEO added.
During the pandemic, the company focused on digitizing operations with online platforms. FE Credit has applied software to human resource management, which simplifies the process, reduces costs and time to complete tasks.
Customer service procedures have been digitized. FE Credit’s system can now handle approximately 10,000 inbound calls per day and 5,000 emails, chats and social media sessions, as well as automate nearly all outbound calls.
With technology, the loan approval process only takes days or even hours, instead of weeks as before.
FE Credit has also successfully implemented a multitasking sales model through cooperation with large retail chains, taking advantage of the sales force of its partners. The entire sales process including documentation, electronic contract duration, appraisal, loan approval … is fully digitized, secure and synchronized.
By applying a multitasking sales model, the company saved 70% of selling costs and revenue increased 170% after three months of implementation. Currently, the model helps the company reduce its total costs by 28% and the majority of employee workload.
According to the CEO of FE Credit, the “new normal” status has put low-income workers under financial pressure with urgent spending needs. Lacking information and knowledge about consumer loans, especially in rural areas, many people easily find usury to cover their expenses.
“As a market leader in consumer loans, we understand our role in the fight against usury. In the event of our 11th anniversary, we are continuing our mission of developing a sustainable and transparent consumer financial market.” , added Ghose.
FE Credit has launched several preferential consumer loan programs with reasonable interest rates, simple procedures and flexible forms to allow customers to access loans easily and securely after foreclosure, help in the fight against wear and tear.