“The client did not ask about the interest rates of the offered loans. He simply said that he does not intend to borrow money at this moment, because the interest rates are still too high, and he hanged up on me,” an officer of a bank, who offered consumer loans to clients, said.

Dam The Thai, Personal Banking Director of An Binh Bank, also said that many people have delayed their borrowing plans.

Meanwhile, Bui Tan Tai, Personal Banking Director of Asia Commercial Bank (ACB), said that outstanding consumer loans at the bank have decreased since the beginning of the year.

Tai went on to add that many clients have paid debts before their consumer loans have matured, and that the volume of debts paid before they become due accounts for five percent of the bank’s total outstanding loans.

Meanwhile, another banker said the volume of consumer loans paid before the loans become matured accounts for 40-60 percent of the bank’s total outstanding loans. People can pay debts back soon because they have kieu hoi. Kieu hoi (overseas remittance) is understood as the money sent by overseas Vietnamese to their relatives in Vietnam to support their lives.

According to Governor of the State Bank of Vietnam Nguyen Van Giau, by the end of May, consumer outstanding loans had reached 122 trillion dong, which means no increase in comparison with the beginning of the year.

One of the reasons keeping clients away from consumer credit, according to Dr Le Tham Duong from the HCM City Banking University, is that consumer loans always have very high interest rates. Besides, Vietnamese people generally do not have the habit of borrowing money from banks to purchase goods for personal use. They only borrow money to fund the purchase of valuable assets, such as houses or cars. Duong also said that the contracts signed by banks and clients are always designed in a way that allows banks to play safe.

With deposit interest rates now on the increase, lending interest rates for consumer loans have also fluctuated consistently, making borrowers unable to calculate the fixed sums of money they have to pay to banks after five or ten years, depending on the length of the loan.

For some banks, the lending interest rate is calculated by the 13-month term deposit interest rate plus a margin of seven percent. According to experts, the margin of seven percent is really a burden on borrowers.

There is another reason which can explain the indifference of Vietnamese people to consumer credit: that the real estate market has been frozen for a long time. As people do not make transactions on the real estate market, they don’t need to borrow money from banks.

According to Le Xuan Nghia, Deputy Chairman of the National Advisory Council for Monetary Policies, outstanding loans given to fund real estate projects reached 200,000 billion dong in 2009. Meanwhile, by May 2010, the figure had reached 192 trillion dong, according to the State Bank.

Source: Saigon tiep thi