Vietnam's pawnbroking market: a decade in review

Ten years ago, pawnbroking was seen as a precarious and controversial lending segment. But ten years later, glimmers of light have appeared, even though the prejudice remains.

The dark side of a decade ago

In the memory of Mr. Trung (born 1995), pawnbroking ten years ago was "light on the bright, heavy on the dark." In September 2013, he came to Hanoi and became a communications student. Half a year later, he had become a customer of the pawnshops tucked away beside Xanh Market, Cau Giay.

Back then, his Wave Alpha motorbike was often valued at only 5-6 million VND even though its real value was more than ten million. "Pawn it or get lost!" was the common answer to every query. Pawnbroking charged interest of 2,000 VND per million per day, high relative to the student living standards of the time.

Once the money changed hands, the shop owner pushed the bike into a tin-fenced plot behind the market, leaving it exposed to rain and sun, indifferent to the pained looks of the borrower. "Everywhere is like that, there's no choice, is there?"

And yet pawnbroking "accompanied" Mr. Trung throughout his university years, a lifeline while waiting for scholarships, part-time wages and so on. In those days, banks and finance companies had yet to pay attention to this customer segment, and the students knew only to turn to pawnshops.

Pawnshops ten years ago were "light on the bright, heavy on the dark." Photo: MH

That memory has not faded, with "dark patches" such as asset valuation, interest rates, asset safekeeping, not to mention the concept of customer care. It was like a prejudice.

To this day, though he has a stable job, Mr. Trung still keeps an eye on this lending service segment. After more than a decade, pawnbroking has changed a great deal. The biggest change is the completion of the legal framework through the 2015 Civil Code, Decree 96/2016/ND-CP and several other specialized laws such as the Commercial Law.

The light of ten years later

Along with the legal framework, the rise of new-generation pawn chains over the past 5-6 years has also created a positive shift.

These include Nguoi Ban Vang, Srisawad, Happy Money, Vietmoney, Dong Shop Sun and, especially, the name F88. F88 is a mass-market financial store chain with more than 950 stores nationwide, specializing in providing loans secured by motorbikes and owner-titled cars.

After disbursement, F88 keeps only the original vehicle registration/title and hands the vehicle back to the borrower to use and safekeep. According to Mr. Trung, this approach helps borrowers stay proactive in their work and avoid the "heartache over one's belongings" that he experienced 10 years ago, when he had to hand over both the vehicle and its papers to the shop for safekeeping.

"F88 may not necessarily be the first to think of this way of lending, but they implement it in a systematic, legal manner and at large scale. Now, when it comes to borrowing money from F88 using a motorbike registration, everyone understands that you both receive the money and get to keep the bike for travel, which is very convenient. This change is a bright spot, and in the coming time, the pawnbroking market will change in a positive direction with the participation of new-generation pawn models like this one," the customer commented.

F88 is a mass-market financial store chain with more than 950 stores nationwide. Photo: F88

According to FiinGroup, Vietnam's leading independent market research and credit rating firm, the compound annual growth rate (CAGR) of the pawn chains' outstanding loans in the 2019-2024 period was 53.3%, with total outstanding loans reaching 5,227 billion VND in 2023, accounting for 8.5% of the total outstanding balance of the entire pawnbroking market.

The scale of the chains' outstanding loans has grown ninefold compared with the 2010-2022 period and will continue to rise strongly. FiinGroup also noted: "The pawnbroking market is transforming to become more professional with the flourishing of the new-generation pawn model."

According to Mr. Trung, it is very easy to recognize the "greater professionalism" that FiinGroup mentions through the way new-generation pawn chains such as F88 are operating their services.

That is disclosing interest and fees transparently from the outset; loan contracts built rigorously on a legal basis and clearly explained before the customer signs; the timing and repayment obligations, including both on-time and overdue (if any), clearly defined in writing; and mechanisms for care and for receiving complaints when disputes arise.

Alongside this, the stores and transaction offices appear openly, helping borrowers access them easily. F88 has even rolled out the MyF88 digital app so that customers can easily complete loan procedures on a digital platform, receive disbursement or raise queries in the fastest way.

"The market has seen bright spots, but the prejudice has not truly been erased. This cannot be done overnight, but if the more than 20,000 pawnshops nationwide also follow the way F88 has done over the past 10 years, then soon enough the prejudice will fade and pawnbroking will truly become a fast, easy and transparent form of borrowing for ordinary working people," Mr. Trung commented.

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Nguồn: TheLeader — theleader.vn. Bài viết được đăng lại phục vụ mục đích chia sẻ kiến thức cho cộng đồng founder và nhà đầu tư trong hệ sinh thái HCM VIF.