Vietnam’s financial leasing potential
HANOI — Financial leasing institutions are the lastest solution to resolve capital shortages of local businesses, especially small- and medium-sized enterprises (SMEs).
Financial leasing has been a popular channel to mobilise capital globally, with total revenue of up to US$1 trillion per year.
Financial leasing is a credit activity in the mid-and-long-term through the leasing of machines, equipment, transport vehicles and other assets, such as office buildings.
In the United States, 80 per cent of firms, ranging from SMEs to large companies on the list of Fortune 500, have leased some of their machines and equipment used in production and trading. In addition, over 30 per cent of total equipment was provided through financial leasing contracts.
In Japan, revenue from annual financial leasing was some $50 billion.
However, according to Phan Duc Tu, BIDV’s general director, the financial leasing market in Vietnam is small, with total outstanding of VND8.7 trillion ($383 million), accounting for only 0.16 per cent of total outstanding credit.
Tu said foreign investors were surprised to learn about the financial leasing situation in Vietnam. Financial leasing has been taking place for a long time in Vietnam. However, despite 20 years of development, there are only 11 financial leasing companies, the State Bank of Vietnam (SBV) said.
“Vietnam is still a potential market for the development of financial leasing, especially SMEs, which account for over 95 per cent of the country’s total firms,” he said in a seminar on financial leasing opportunity in Vietnam last week.
When joining in financial leasing activities, businesses could use new technologies and access capital to buy assets.
Last week, BIDV-SuMi TRUST Leasing Co, Ltd (BSL) — the first financial leasing joint venture between a Vietnamese bank and a foreign financial institution in Vietnam — officially opened.
BSL is a joint venture between the Bank for Investment and Development of Viet Nam (BIDV) and Sumitomo Mitsui Trust Bank (SuMi TRUST) of Japan.
The joint venture, with charter capital of VND900 billion, is expected to attract more than 3,200 Japanese firms operating in Vietnam that have been using financial leasing services. It was also expected to appeal to other FDI and local companies in the country.
“BSL would connect equipment producers and suppliers to support end-users to find suitable machines for their demand as well as financial solutions,” BSL’s general director Nguyen Thieu Son said.
Nguyen Van Than, chairman of Vietnam Small- and Medium-Sized Enterprises Association, said a small bicycle producer in the northern province of Hai Duong had received a big order.
However, he was not capable of expanding production because of capital shortage and it was hard to get access to bank loans, thus leaving him with no choice but to refuse the order.
Than believed financial leasing would be an effective solution for Vietnamese SMEs.
Nguyen Trong Du from the central bank said one of the special characteristics of financial leasing companies was not only providing capital support, but also receiving deposits from organisations. Therefore, it would be a channel for capital mobilisation, especially mid-and-long term, in the future.
Du said SBV would continue to complete the legal framework to facilitate financial leasing activities. — VNS