New comers look to setting up financial companies
Source: 08-AUG-2008 Intellasia | 06/Aug/2008 Nguoi Lao Dong
Aug 8, 2008 - 7:00:00 AM While a series of applications for establishing banks are being stored in the State Bank of Vietnam (SBV), many domestic and foreign groups and corporations are switching to petition for establishing financial companies.

Within three last months, there were 16 financial companies being established. Of which, 12 units are under Vietnam's big groups and corporations and four others 100% invested by foreigners and nearly 10 applications waiting for approvals.

With more uncomplicated procedures than establishing banks, just with a chartered capital of 300 billion dong being applied from 2008 (that earlier was 70 billion dong and could be raised to 500 billion dong by 2010), setting up financial firms will be good chance for new comers in the Vietnam financial market, especially foreign-invested financial companies. Moreover, finding that private enterprises and small and medium enterprises (SMEs) are in deep needs of capital. But it's very hard to access capital sources from big banks whereas domestic financial companies favour only local groups and corporations. Thus foreign financial companies should approach these enterprises to expand their market shares. However, it's not easy for financial companies to get benefits from this field.

In fact, although SBV allows financial firms to operation in diversified sectors with many kinds of services, domestic financial firms still concentrate on their function of as a local bank for a new comer and ignore other services. For example, Vinashin Financial Co only seeks capital for Vinashin's projects and VNPT Finance Co only serves Vietnam Post and Telecommunications (VNPT). These financial arms depend on their parent companies. Therefore, as the economy weakens, they also are seriously affected. Even many domestic financial companies showed losses such as Seaprodex Financial Co (being dissolved already) Saigon Financial Co (being absorbed in Viet A Bank) and Rubber Financial Co (being inspected on bad debts).

Many people think that this will be good opportunity for foreign financial companies like Prudential, SG, PPF and Toyota to cover the space that local financial firms are ignoring such as loans for consumption and secured lending for individual customers. Yet, despite being granted establishment license in Vietnam for over one-year, customers have known about Prudential Vietnam Financial Co since three recent months.

An economist said that within an economic context at this moment, establishing more financial companies would be active agent to increase the competitiveness and driving force to boost the market whereby customers would access to more competitive valuable services.

According to HCM City National University's Dr Le Vu Nam, quite many financial companies that were set up from groups operating in the industrial field will be a big barrier for the economy due to administration standards, risks levels and consequences from financial shocks between two completely different fields. Thus, SBV should tighten up as well as more carefully consider conditions for financial company establishment. A financial firm being set up with carefully considered conditions would be an attractive capital channel. However, if just aiming to increase its big shareholder's profits and pursuing impending gains, these financial firms will be a burden for the economy.