Vietnam to begin testing P2P lending from July 1

P2P lending refers to a model that connects borrowers and lenders directly via online platforms, bypassing traditional financial intermediaries such as banks.

The government has issued a decree introducing a regulatory sandbox mechanism for financial technology (fintech) solutions in the banking sector.

Under this new framework, P2P lending companies may only offer pilot services when securing a permit issued by the State Bank of Vietnam.

The P2P lending trial does not apply to foreign banks.

Fintech companies and credit institutions may apply to participate in the sandbox, but acceptance into the pilot does not automatically grant them the right to offer the services once the policy is official.

Organizations seeking participation will be assessed based on transparent, objective, and public criteria.

They must still comply fully with all existing regulations.

The results of the trial will serve as a basis for regulators to research and build a comprehensive legal framework for P2P lending.

According to the State Bank of Vietnam, the number of fintech companies operating in the country has surged to approximately 200 in 2022 from about 40 in 2016.

These companies work in various fields such as payment services, P2P lending, and credit scoring.

However, the central bank also acknowledged cases in which certain companies exploited the P2P lending model to mislead and defraud users.

Some companies have falsely promised high returns or attractive interest rates to lure investments, misappropriating investor funds.

Many agreements between P2P lending companies and other stakeholders, such as investors, third-party partners, and borrowers, often lack legal clarity and enforceability. 

Additionally, there is currently no mechanism in place to supervise the use of loan funds, which can result in disputes and lawsuits.

The pilot program aims to encourage innovation, modernize the banking sector, and promote financial inclusion in a transparent, safe, and efficient manner.

The outcomes of the pilot will be used to evaluate the necessity of regulatory updates.