FE Credit Strictly Control Bad Debt Risks After the Pandemic
The Covid-19 pandemic in the past 2 years, has negatively affected the credit quality of all credit institutions. NPLs and bad debt ratio on the balance sheet increased continuously from 2020, to the end of November 2021, at over 2%.
According to the State Bank of Vietnam, the ratio of bad debts on the balance sheet, debts sold to asset management companies, and potential bad debts, was as high as 7.42%.
In particular, for the consumer finance segment, the main customers of financial companies are the most vulnerable to the impact of Covid-19 due to job loss and income reduction. According to experts, bad debt at many financial companies has increase by 30-40%. Meanwhile, the debt collection of these companies is more difficult, it is likely that it will not be able to recover until the third quarter of 2022. Therefore, for financial companies, experts believe that credit growth in the coming time needs to go hand in hand with improving credit quality and taking measures to strictly control bad debts.
In order to limit the risk of bad debts rising, financial companies have been drastically coming up with solutions to recover and handle bad debts thoroughly.
FE Credit, consumer finance company with about 50% market share, has been significantly impacted by the pandemic, as it had to both reduce credit growth and increase provisioning to ensure asset quality in the long term.
In order to control bad debts, FE Credit has actively improved the quality of risk management and actively controlled credit quality. Specifically, the company is always strict in assessing the repayment ability of customers, analyzing customers to come up with a suitable repayment plan for customers. FE Credit also actively makes provision for bad debts, classifying debt groups according to the correct status of debts.
Regarding debt recovery, FE Credit prioritizes solutions to support customers in repayment. The company has implemented interest exemption and deferment programs according to regulations to support customers who affected by the pandemic.
At the same time, the company also continuously promotes digital transformation to improve the risk management quality. The use of technology in the appraisal process such as disbursement by facial authentication or e-KYC electronic identification technology ... plays an important role in helping FE Credit make more accurate credit decisions and minimize the risk of bad debt.
In the coming time, following the directions and orientations of the Government and the State Bank of Vietnam to maintain and improve the efficiency of bad debt handling, FE Credit continue to implement a debt recovery strategy thoroughly and offer many collection initiatives to adapt to the actual situation as well as reduce the bad debt ratio to a low level.
A representative of FE Credit said: “We hope that after the recovery of the first quarter of 2022, the company will regain its growth momentum. Currently, FE Credit always has resources ready to implement that plan. We continue to expand customer base through cross-selling, focus on existing customers. We see this pandemic as an opportunity for us to demonstrate our internal capabilities and the importance of digital transformation in credit quality control.”