Vietnam wonders if it should ban loan sharks | Voice of America



HO CHI MINH CITY – In the Vietnamese action blockbuster “Fury” watched primarily on Netflix, the protagonist puts her gang days behind her and becomes a debt collector. The fact that filmmaker Veronica Ngo, whose recent credits include Star Wars The Last Jedi, chose this as a plot detail reflects how debt collection is a fairly well-known part of life in Vietnam.

As in the protagonist’s past, some aspects of real-life debt collection have become sordid and even dangerous, so much so that authorities wonder if it should not even be a legal industry anymore. Critics fear that desperate borrowers have turned to loan sharks, who could use illegal means to collect their debts. Others say people with bad borrowing histories still need access to loans, especially when they are turned down by traditional banks.

The debate, which began last month in Parliament, is similar to that which took place in the United States, amid the payday lending and predatory lending that contributed to the subprime mortgage crisis. Now the debate has come to Vietnam as consumer demand increases for housing, vehicles and even smartphones, all of which can be purchased through loans.

A motorcycle driver walks past an Eximbank branch in Ho Chi Minh City. (H. Nguyen / VOA)

“This enterprise has created many negative consequences for society,” said Pham Huyen Ngoc, Member of Parliament. He and his colleagues were discussing whether to add debt collection to the list of industries restricted or prohibited by law.

It is not difficult to walk around Vietnam and find lenders in the shadow economy. They post flyers on streetlights or write their numbers directly on the walls surrounding yards or construction sites, offering loans. There is even a slang term for this practice: “tin dung cot dien”, or credit of an electric pole.

The social impact of the debt burden also gained public attention after October, when authorities in Essex, England discovered that 39 Vietnamese had suffocated to death in a truck. This has led to discussions about human trafficking and the debts migrants incur when they pay brokers to take them to places like England. Another social issue that concerns authorities is gambling, a common reason people go into debt.

When vulnerable borrowers gain the upper hand, a single event in life, like a hospital bill, can easily lead to a missed payment. This adds more late fees and interest, which leads to a debt trap. Officials like Ngoc fear that if these loans come from illegal lenders, they threaten the borrowers.

However, it may not be realistic to ban debt collection altogether. Since there is money, there are people who borrow it, whether they are eligible for legal bank loans, or whether they resort to other lenders.

“I think the problem is that the relevant authorities, including the police and the local government, must have strict management and regulations,” said Bui Thi Quynh Thoa, Member of Parliament.

She was also concerned about the potential for violence in debt collection. However, the business needs to be regulated rather than banned, she said.

Vietnam faces a difficult situation. He wants to protect vulnerable borrowers from potentially dangerous money lenders. However, it is difficult to get rid of the gray economy completely. Solutions are hard to come by, although it can be helpful to look at what other places are doing. For example, at a church in Philadelphia, a city in the mid-Atlantic region of the United States, members form groups to help each other pay off each other’s debts. This helps prevent individuals from missing a single payment, which could drag them into a cycle of debt, and increases the chances that everyone’s debt will be collectively repaid. However, how an entire nation can solve the debt problem is a bigger question.


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