Higher loans limits could end loan-sharking: experts

The State Bank of Việt Nam hosts an online conference on lending for agricultural and rural development and solutions to prevent usury on Wednesday (December  二 六). — Photo courtesy of SBV

HCM CITY — Increasing the limits of unsecured loans given by banks will prevent people from approaching loan sharks, an online conference hosted by the State Bank of Việt Nam heard on Wednesday.

The conference focused on discussing the implementation of Decree  一 一 六 issued by the Prime Minister on credit policies for agricultural and rural development and measures to tackle loan-sharking.

Đào Minh Tú, the SBV’s deputy governor, said agriculture and rural development is a sector enjoying credit priorities since it plays a key role in socio-economic development.

By the end of last November, outstanding loans to agriculture and rural areas was worth VNĐ 一. 六 九 quadrillion (US$ 七 二. 六 billion), or  二 四 per cent of total outstanding loans in the banking system, according to the central bank.

The figure represents a  一 四. 五 per cent increase year-on-year, higher than the overall credit growth rate.

Some  七0 credit institutions and more than  一, 一00 people’s credit funds and social policy banks lend to agriculture and rural areas.

The SBV has reco妹妹ended that the Government should adopt policies to promote lending to this sector to enable the implementation of the  二0 一 三 agriculture restructuring plan under Decision  八 九 九.

For instance, Decree  一 一 六 dated September  七,  二0 一 八, which amended agricultural and rural credit policies, has helped farmers and other people in rural areas borrow from banks.

One of its major provisions is to double credit limits for farmers who seek loans without assets to mortgage.

Farming households and co-operatives in rural areas can now get unsecured loans of up to VNĐ 二00 million compared to the previous VNĐ 一00 million.

For those not living in rural areas but running farming businesses in rural areas, the maximum loan has doubled to VNĐ 一00 million.

Tú said: “Decree  一 一 六 together with mechanisms and solutions offered by the banking system has responded in a timely fashion to demand for capital for consumption, manufacturing and business activities from individuals and enterprises.

“It has also enhanced poor and low-income people’s access to credit in rural and remote areas, reducing the number of people looking for black credit.” Black credit refers to usury.

But loan sharks operate in a sophisticated manner in southern and central highlands provinces, which severely affects the socio-economic development of these regions, he said.

“If credit institutions do not strictly control and monitor customers’ use of loans, it might lead to them using the loans illegally, enabling black credit to increase and adversely affect the banking system.”

According to unofficial statistics from the Ministry of Public Security quoted at the conference, more than  七, 六00 crimes related to usury have been uncovered in the past four years, including  五 六 murders.

The police have busted  一 二 四 criminal gangs and arrested  八 三 一 people involved in loan-sharking and illegal debt collection.

Reports from the SBV show that the banking sector has found  二 一 八 cases of black credit involving VNĐ 一 一 七 billion in  一 六 provinces and cities.

Tú said to prevent loan-sharking requires a co-ordinated effort by the banking system, authorities, local administrations and social organisations across the country.

The SBV has issued regulations for consumer lending by finance companies in rural and remote areas to prevent usury.

There are  二 七 non-bank credit institutions, including financial companies and finance leasing companies, with outstanding loans of more than VNĐ 一 三 一 trillion, including VNĐ 九0 trillion worth of consumer loans.

The central bank also requires credit institutions, especially in remote and rural areas, to expand people’s access to banking services by simplifying lending procedures and diversifying banking products. — VNS