English
Tiếng Việt
Financial leasing in Vietnam in the future is a potential that needs to be exploited.
Posted date 02/04/2016
527 view
Posted date 02/04/2016
527 view
Share:
Ms. Trinh Thi Minh Nguyet - Faculty of Finance and Banking
BUY WHAT WILL INCREASE IN PRICE, RENT WHAT WILL DECREASE IN PRICE.
That is a very famous quote from Paul Getty, an American oil tycoon, the world's first billionaire. Today in the US, over 30% of all equipment is equipped under lease contracts. More than 80% of companies - from small start-ups to Fortune 500 companies - lease part or all of their machinery and equipment. And in Vietnam, how are financial leasing companies doing now? This will be the issue that the author will address in this article.
We know that financial leasing is a medium and long-term credit activity through the leasing of machinery, equipment, means of transport and various asset activities on the basis of a leasing contract between the lessor and the lessee. Financial leasing in its current form originated in the United States. The first American leasing company was founded by Henry Shofeld in 1952. The company was established to serve the railway transport industry. In Vietnam, the first financial leasing company was established in 1996 and financial leasing activities had also begun in banks before that, but it was not until the Government issued Decree 16/2001/ND-CP on May 2, 2001 that financial leasing activities in Vietnam were truly formed and increasingly developed strongly. To date, there are over 20 financial leasing companies in operation, including state-owned, joint-stock, joint-venture and foreign financial leasing companies.
Financial leasing activities often target small and medium-sized or micro enterprises or enterprises that do not have enough access to bank capital or cannot raise capital on the stock market. When participating in financial leasing, hire purchase or operating leasing activities, enterprises will be able to use new technology, innovate techniques and access nearly 100% of the capital to form assets from financial leasing companies.
Financial leasing and financial leasing companies have been established and developed in Vietnam for quite a long time, nearly 20 years. However, the results of several studies have shown that this service is not of interest to many businesses. At the same time, the development of financial leasing companies has also become sluggish and faces a not-so-bright future.
Specifically, in a survey of 1,000 businesses in different industries, more than 70% of businesses responded that they knew very little and had never learned about financial leasing services from financial leasing companies; nearly 20% were completely unaware of this financial service, and some businesses even understood financial leasing as an installment payment activity and did not understand this as a credit granting business, as well as its superiority and efficiency.
As for financial leasing companies in Vietnam, up to now, the situation of prolonged losses, the risk of insecurity, and serious violations of banking safety regulations. Recently, the State Bank revoked the operating license of ANZ/V-TRAC Financial Leasing Company (a company completely independent of ANZ Bank). According to the Financial Leasing Association, in fact, this company has stopped operating for a long time and the license revocation is only a procedural completion.
In addition to ANZ/V-TRAC, another 100% foreign-owned leasing company, Kexim, has also almost ceased its leasing operations. The other two 100% foreign-owned companies in this sector are also operating ineffectively.
Not only 100% foreign-owned companies, but many domestic financial leasing companies also fall into a state of loss or high bad debt, such as Financial Leasing Company II - Agribank, Financial Leasing Company I - Agribank, Vinashin Financial Leasing Company Limited...
Meanwhile, a financial expert affirmed that most domestic financial leasing companies have very small charter capital and mobilized capital, but often buy high-value assets for lease such as ships and technological lines, but do not have collateral. Therefore, most of these companies face very high liquidity risks.
Unit: Million VND
Not only 100% foreign-owned companies, but many domestic financial leasing companies also fall into a state of loss or high bad debt, such as Financial Leasing Company II - Agribank, Financial Leasing Company I - Agribank, Vinashin Financial Leasing Company Limited...
Meanwhile, a financial expert affirmed that most domestic financial leasing companies have very small charter capital and mobilized capital, but often buy high-value assets for lease such as ships and technological lines, but do not have collateral. Therefore, most of these companies face very high liquidity risks.
Unit: Million VND
| Total assets Yes | Equity | Minimum capital adequacy ratio | Credit to deposit ratio | |||
| Target | Absolute number | Growth rate | Absolute number | Growth rate | ||
| Financial leasing company | 62,958 | -3.80% | 2.22 | -16.97 | 3.35% | 237.86% |
(Source: State Bank)
According to data from the State Bank of Vietnam, financial leasing activities have great potential when operating in Vietnam, where small and medium enterprises account for over 95% of the total number of enterprises. However, the total outstanding debt and assets of this type are decreasing. In particular, the value of equity is decreasing seriously, and there are companies that have negative equity with a large amount of money. At the same time, the minimum capital adequacy ratio (CAR) of the whole industry is only 3.35%, while the minimum requirement is 13%. At this point, the order to restructure the operations of financial leasing companies must take place and must be increasingly urgent.
The emergence and popularity of financial leasing activities and financial leasing companies are inevitable in the completion of the financial system. The contributions of financial leasing companies will help balance the development between the money market and the capital market, while increasing the medium and long-term capital in the choice of forming long-term assets of enterprises. Remember, "wealth does not lie in the ownership of assets but in the right to use it" and enterprises with feasible asset usage plans and awareness of the role of financial leasing activities will maximize the profits they pursue. Financial leasing companies will play a major role in the channel of transmitting medium and long-term capital to economic entities. Certainly, financial leasing activities in Vietnam in the future are a potential that needs to be exploited./.
According to data from the State Bank of Vietnam, financial leasing activities have great potential when operating in Vietnam, where small and medium enterprises account for over 95% of the total number of enterprises. However, the total outstanding debt and assets of this type are decreasing. In particular, the value of equity is decreasing seriously, and there are companies that have negative equity with a large amount of money. At the same time, the minimum capital adequacy ratio (CAR) of the whole industry is only 3.35%, while the minimum requirement is 13%. At this point, the order to restructure the operations of financial leasing companies must take place and must be increasingly urgent.
The emergence and popularity of financial leasing activities and financial leasing companies are inevitable in the completion of the financial system. The contributions of financial leasing companies will help balance the development between the money market and the capital market, while increasing the medium and long-term capital in the choice of forming long-term assets of enterprises. Remember, "wealth does not lie in the ownership of assets but in the right to use it" and enterprises with feasible asset usage plans and awareness of the role of financial leasing activities will maximize the profits they pursue. Financial leasing companies will play a major role in the channel of transmitting medium and long-term capital to economic entities. Certainly, financial leasing activities in Vietnam in the future are a potential that needs to be exploited./.
Latest article
View all Posts
Related articles
See all related Articles
Register for admission consultation 2025
Dai Nam University offers admissions to
36 academic programs
across a diverse range of disciplines, including Healthcare, Engineering and Technology, Economics and Business, and Social Sciences and Humanities.
Register now to secure
scholarships and tuition support worth up to 55 billion VND
scholarships and tuition support worth up to 55 billion VND
Register now to secure
scholarships and tuition support worth up to 55 billion VND
scholarships and tuition support worth up to 55 billion VND
