Peer
to Peer Lending (P2P) has becoming more popular in many countries. This form
first appeared in the UK since 2005, then succeeded in the US and China
markets. By 2017, P2P lending businesses start to appear in Vietnam in
different forms.
Three
subject matters in P2P lending relation include: investor (or lender), intermediary
company (P2P Lending Company) and borrower. P2P Lending utilizes digital
technology platform connecting lenders and borrowers directly, cutting out the
credit institution as the middleman. Accordingly, P2P Lending Company provides
online services (website, app) that match lenders with borrowers. The idea
is that, all borrowing, debt payment (principal and interest) between the
borrowers and lenders are recorded and stored by the online transaction
platform. This method is completely different from the traditional loan form by
increasing the ability to successfully connect lenders and borrower through
online platforms along with advanced financial technology systems.
The
relationship between lenders and borrowers is civil relation, therefore, the lending
or payment is based on the regulations of Vietnam Civil Code. According to P2P
Lending Company, the nature of P2P Lending Company is a broker between lenders
and borrowers through technology. However, under Article 8.2 of Law on Credit
Institutions 2010: “Individuals and organizations which is not credit
institutions are prohibited from conducting banking operations, excepting
escrow, purchase and sale of securities by securities companies”. Therefore, it
is challenging for stakeholders to clearly define the boundary services could
extend under P2P mode without violation of the laws.
In
a good term, P2P lending creates a new way for approaching the loans when
borrowers are not satisfied for the conditions of conventional bank loans. The
advantages of P2P lending in Vietnam are the simplification of procedures, fast
approval for loans, easy online transaction, in comparison to borrowing from
banks which requires a complex and strict examination process.. Since P2P
Lending Company offers these services online, it is expected it can operate
with lower overhead and provide the service at a cheaper price than traditional
financial institutions. If applying appropriately, P2P lending could be a
solution to minimize other illegal lending services in Vietnam.
The Vietnam government has assigned The State
Bank to build a legal framework for credit extension activities under the form
of P2P Lending to promote the positive aspects of this service. At ANT Lawyers,
a law firm in
Vietnam, with offices in Hanoi, Ho Chi Minh City and Da Nang, we
have technology, IP and business lawyers whom are familiar with development of
digital transformation in Vietnam that could bring new ways of doing business
leveraging on high rate of Vietnam smartphone users to prove a better services
to high tech start-up clients entering Vietnam market.
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