Thursday, 31/07/2008 08:14

Finance companies booming

A series of finance companies have been licenced in the last three months. Not only general corporations are rushing to set up finance companies, foreign investors also want to set up finance companies after the central bank set stricter requirements on newly set up banks.

When asked why so many finance companies have been established recently, Tran Xuan Chau, Deputy Director of Banks and Non-bank Credit Institutions under the State Bank of Vietnam, cited a lot of reasons.

Chau said that as economic groups and general corporations have become bigger and stronger, they need to have their own finance institutions which serve their demands for mobilising capital for production and business.

Meanwhile, Dr Nguyen Quang Hung, an economist, said that setting up finance companies proves to be a good choice nowadays, as economic groups and corporations now find it hard to set up banks due to the strict requirements.

It is clear that the procedures to set up finance companies are simpler than the procedures for setting up banks. Investors must have VND300bil to set up a finance company in 2008, and VND500bil in 2010 (the required capital was VND70bil in the past). Meanwhile, finance companies can provide a lot of types of services like banks, except payment service and less than one-year term capital mobilisation.

Sources say that 10 applications for setting up finance companies are on the table of the State Bank of Vietnam, including Vinaconex’s finance company, the establishment of which the central bank has agreed to in principle.

Regarding the worry about the booming of finance companies, Chau with the State Bank says that the central bank will be cautious when licencing finance companies to be sure that the companies can operate well and effectively.

In fact, several finance companies operated ineffectively, and were dissolved, including Seaprodex’s finance company, Saigon Finance Company (which has merged into Viet A bank) and Vietnam Rubber Corporation’s Finance Company.

VNN

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