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Recognized as an effective capital mobilization channel for businesses with great potential and room for development, in 2024, the Vietnam Financial Leasing Association continues to actively promote efforts to resolve legal obstacles, creating a favorable environment for financial leasing activities in Vietnam.

Impressive figures of 2023 and the prospects for 2024 in the financial leasing market

According to the Vietnam Financial Leasing Association (VILEA), 2023 recorded impressive results from member companies. The total assets of the 6 member companies reached over 41 trillion Vietnamese dong, an increase of 10.65% compared to the end of 2022. The total mobilized capital recorded a growth rate of 25.76% (more than twice the overall growth rate of the entire banking system) with a value of 19.8 trillion Vietnamese dong. The total financial leasing debt reached 37.2 trillion Vietnamese dong (an increase of 13.75% compared to 2022), with the financial leasing debt steadily increasing throughout the quarters. The number of financial leasing contracts for the entire year reached 8,403 contracts (an increase of 1.3% compared to 2022).

In addition, the financial leasing market has seen diverse development in terms of lessee profiles. This includes various types of vehicle leasing (with a debt of 6.6 trillion Vietnamese dong, an increase of 17.03% compared to the end of 2022), leasing of construction and mining machinery (with a debt of 3.2 trillion Vietnamese dong, an increase of 49.41% compared to 2022), leasing of medical equipment (with a debt of 162 billion Vietnamese dong, an increase of 55.2% compared to 2022). Particularly noteworthy is the remarkable growth of 183.49% in the leasing of production machinery, with a debt reaching 7,110 billion Vietnamese dong in 2023 compared to 2022.

In terms of prospects for 2024, factors such as stable macroeconomic conditions, continued infrastructure investment as a driving force for economic development, the trend towards green economy and circular economy requiring a significant amount of green credit, and the development of new industries in the electronics sector, along with Vietnam’s continued attraction for foreign direct investment (FDI) enterprises, are the factors that contribute to the market’s development momentum in financial leasing.

Eliminating legal obstacles

Although financial leasing is an effective capital mobilization channel for businesses, particularly small and medium-sized enterprises (SMEs), it is not widely known in Vietnam. The ratio of financial leasing debt to GDP is very low (less than 0.4%), while in the United States and China, the ratios are 22% and 18% respectively.

According to Mr. Pham Xuan Hoe, the Secretary-General of VILEA, the financial leasing market faces many legal barriers that need to be addressed. These include issues related to the definition of financial leasing products and risk management safety ratios. One difficulty is the new regulations on vehicle registration and operation. Registration time and regional license plates now only refer to the main headquarters, and changing license plates has a significant impact on financial leasing operations. According to preliminary statistics from four member companies, the total value of financial leasing contracts that could not be executed due to obstacles related to vehicle registration and operation amounted to over 400 billion Vietnamese dong.

Currently, VILEA is collecting opinions from its member companies and has requested that the State Bank of Vietnam expeditiously finalize the decree guiding financial leasing in the specialized financial institution sector under the framework of the Law on Credit Institutions (amended). The goal is to create a favorable environment for the development of financial leasing in Vietnam.

Financial leasing – An effective capital mobilization channel for businesses

Mr. Hoe mentioned that providing credit in the form of financial leasing is an optimal method that helps businesses and individuals access credit capital easily and effectively. With several advantages that are suitable for the current context, including not requiring collateral, high financing rates, and not affecting the credit limit at banks, financial leasing products are particularly suitable for SMEs, startups, and production households.

A special product of financial leasing is sale and leaseback, which allows businesses to supplement their working capital for production and business activities. They can sell their operating machinery and equipment to a financial leasing company and then lease them back for long-term use.

Thao Nguyen

(Source: Compiled from Phap Luat newspaperhttps://baophapluat.vn/hoat-dong-cho-thue-tai-chinh-hoan-thien-phap-ly-de-phat-huy-hieu-qua-hon-nua-post503435.html)