Viet Nam’s stricter regulations on unsecured consumer lending are credit positive for finance companies, according to a recent credit outlook report released by the credit ratings agency Moody’s Investors Service.

VPBank Finance Co., Ltd (FE Credit) has the highest proportion of personal loans in its loan portfolio among the three largest finance companies in Vietnam by total loans. — Photo vietnamnet.vn

The State Bank of Viet Nam has proposed changes to regulations on personal unsecured lending by consumer finance companies. The proposed changes include limiting unsecured personal loans in cash to existing customers with good credit and no overdue debt; and limiting the maximum amount of such cash loans to 30 per cent of total loans.

The central bank has not specified when it intends to carry out the new regulations.

According to Moody’s, the proposal is credit positive for Vietnamese finance companies because the stricter regulations will help alleviate asset quality pressure by curbing excessive growth in the riskier consumer-loan segment, which will lead to stronger risk-adjusted returns and will support internal capital generation in the future.

The rating agency also said that bottom-line profitability of finance companies was expected to decrease in 2019 as companies adjust to the new rules.

VPBank Finance Co Ltd (FE Credit) has the highest proportion of personal loans in its loan portfolio among the three largest finance companies by total loans in Viet Nam. The other two companies are Home Credit Vietnam Finance Co Ltd (Home Credit) and HD Saison Finance Co Ltd

All three companies will need to make adjustments to their businesses by focusing on lower-yield products such as consumer durable and motor vehicle loans. Moody’s expects that FE Credit will need to make the most significant adjustments to comply with stricter regulations because of the higher amount of personal loans on its books.

The three companies are also market leaders in other consumer finance segments in Viet Nam and will have to make fewer adjustments to their business practices than smaller finance companies as a result of the new regulations.

These smaller companies have been more reliant on personal loans for business growth and will have greater pressure on their revenue than the top three companies.

Revenue growth of finance companies remains supported by strong consumer demand for credit, while credit costs will be contained by the tighter lending requirement. Both factors will drive stronger risk-adjusted returns for finance companies, according to Moody’s.

Viet Nam’s consumer finance industry grew at a compound annual rate of 41 per cent between 2013 and 2017 on the back of higher personal income and greater penetration of services.

Moody’s expects growth in personal loans to slow significantly when the new regulations come into effect, after far exceeding growth over the past three years for other less-risky consumer loans, such as those for the purchase of motorcycles and durables.

The demand for consumer finance is strong and supported by the buoyant Vietnamese economy.

Now, finance companies constrained from extending new personal unsecured loans because of the new regulations will focus on growing other product segments and will benefit from increased diversification in their lending portfolios and more emphasis on lower-risk products. — VNS

The domestic cement industry is striving to reduce at least a tenth of the country’s energy drain in ­accordance with the country’s national programme on economical and efficient use of energy for the 2019-2030 period, but there remains a number of obstacles to overcome.

Cement plants need more government support to prevent energy drain (Photo: VIR)

Located in the northern port city of Haiphong, Chinfon Cement ­Corporation has been applying a heat recovery power system. “This system has provided 25 per cent of energy to the factory and helped ­reduce environmental pollution,” deputy director Hoang Anh Hai told VIR.

He said that the company is planning to use other kinds of alternative ­materials available in the city such as the soles of shoes, scrap fabrics, and low grade coal.

“We have even thought of ­importing old car tyres, but we need a feasible mechanism so that we have enough raw materials for ­production over a long period,” Hai said. “Currently, there is no collecting system that ensures input material source. We can’t invest a lot of money in the new system of using alternative fuel, while the ­materials are enough for production for one year or a short period of time.”

In Hai’s opinion, without the support of the government, the alternative plans of Vietnam’s cement makers like Chinfon Haiphong will remain in the laboratory.

Meanwhile, as one of the country’s leading cement makers, state-run Vietnam Cement Industry Corporation (VICEM) uses alternative fuel rather than burning energy as well as using waste from other industries, in an attempt to save energy.

In recent years, the entire VICEM system has invested in the installation of a waste heat recovery system. In addition to the economic benefits, it serves to create great ­efficiency in terms of technique and the environment. The generator, which utilises ­exhaust heat, does not use oil and so does not discharge gas into the environment. This is a clean and green system, with little impact on the health of operating workers. The transmitter system takes advantage of rotary kiln exhaust heat, so the generating capacity is entirely ­dependent on the excess heat obtained from the furnace.

According to Nguyen Truong Sinh, sales executive director of cement consultancy Antech Co., Ltd., the leading company in using alternative energy nationwide is INSEE Vietnam’s Hon Chong Cement Plant. Hon Chong has replaced 40 per cent of its energy use with an alternative fuel.

In addition, there are two ­factories in the southern region including Ha Tien Cement that have implemented the programme by using cashew cover.

“This is a good idea that helps make use of available materials in the locality and also saves energy,” Sinh told VIR. “In the near future, the Ha Tien factory will implement a ­programme using rubber waste ­extracted from industry waste.”

However, he also pointed out that obstacles to the factory’s plans exist among local authorities.

“The government and the local authorities need to encourage enterprises to use such materials. Actually, sometimes, the policy of the government is strong, but it fails to be implemented in localities. This is the crux of the issue,” Sinh said.

According to Sinh, the Ministry of Natural Resources and ­Environment and the Ministry of Construction should co-operate to find a long-term solution, “We shouldn’t call for the use of ­alternative fuels and then let ­enterprises ­manage by themselves,” he ­affirmed.

At present, Vietnam has 29 cement production lines with the capacity from 250,000 to 600,000 tonnes each, per year, with the total capacity of about 11.49 million tonnes. These lines were installed over 15 years ago, and thus most of the equipment is now obsolete and consumes large amounts of fuel.

According to industry experts, besides using alternative fuels, cement ­makers should also apply ­modern technologies in their production to save energy. In addition, plant annual health screening is also one of the most effective solutions to ensure optimisation of the plants’ operation and energy efficiency.

VIR