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Financial leasing market in Vietnam

The financial leasing market in Vietnam has been present for 30 years, but this service has not been well-known and used by businesses, and the market scale is still small compared to its potential and the demand of enterprises. By the end of 2022, the total outstanding balance of financial leasing is only around 40,000 billion VND, equivalent to only 0.33% of the total credit outstanding in the economy, and the number of businesses using this service is only about 0.4% of the total number of businesses.

Therefore, financial leasing has not yet shared the burden of long-term capital with commercial banks. There are few financial leasing companies, and the range of services they are allowed to provide is limited and does not meet the needs of businesses.

Meanwhile, the global leasing revenue continues to grow, reaching around 1,900 billion USD in 2022, an increase of 9.1% compared to 2021.

Difficulties in organization and operation

The development of the financial leasing market in Vietnam has many reasons, such as psychological, cultural, and business habits, as well as inadequate communication and dissemination.

According to BSL, an important reason is the legal barriers that hinder the development of this market. The legal barriers come from regulations related to the organization of companies, such as Article 34 of the Law on Credit Institutions, which prohibits financial leasing companies from appointing managers from parent banks to hold management positions in the company, making it difficult for these companies to implement strong business strategies in line with their parent banks’ direction. Moreover, the Law on Credit Institutions currently does not allow financial leasing companies to contribute capital, purchase shares, establish subsidiaries, or affiliated companies, which limits these companies’ expansion in the value chain of financial leasing services.

In addition, there are many legal barriers and restrictions in the financial leasing business, including regulations related to the conditions for leasing in detail and strictly, unclear regulations on assets for leasing, and limitations on financial leasing companies borrowing for more than one year from credit institutions (except for parent banks). Furthermore, there are obstacles related to value-added tax (VAT) for businesses in export processing zones, VAT for businesses eligible for tax exemptions/reductions when leasing financial services, and difficulties related to taxes, fees, and registration of transport means when implementing financial leasing.

Therefore, there is a lack of policies to encourage the development of financial leasing services, and in practice, there are many scattered regulations that are not consistent, leading to obstacles in the process of financial leasing companies providing services to customers. The work of propaganda, training, and dissemination of this type of service has not been given much attention, leading to businesses and people not knowing much about the financial leasing channel. This requires financial leasing companies to promote their promotion and introduction of their products to potential customers.

Proposing solutions

Mr. Nguyen Thieu Son proposes to review and amend the legal regulations related to financial leasing activities, including the Law on Credit Institutions, Decree 39/2014/ND-CP, Circular 30/2015/TT-NHNN, and other regulations, to ensure consistency and create a basis for financial leasing companies to carry out their business safely and effectively.

He also hopes that the State Bank of Vietnam will coordinate with other functional agencies to build a unified and strict legal framework. Additionally, he suggests reviewing Joint Circular 08/2007/TTLT-NHNN-BCA-BTP and imposing sanctions for handling financial leasing assets equivalent to or higher than the pledged assets. He also emphasizes the need to amend regulations on VAT and related fees and charges in financial leasing activities and to develop policies to encourage the development of the financial leasing market.