What is peer-to-peer (P2P) lending?

- Peer-to-peer lending is a form of direct lending of money to individuals or

businesses without an official financial institution participating as an intermediary in
the deal. P2P lending is generally done through online platforms that match lenders
with the potential borrowers.
- P2P lending offers both secured and unsecured loans. However, most loans in the
form of P2P lending are unsecured personal loans. Bank lending refers to unsecured
loans that hold lenders and borrowers through online platforms without the
intermediary of any financial institution.
- Peer-to-peer lending companies that often operate online can reduce costs and
provide services at cheaper rates than traditional financial institutions. As a result, this
form of lending becomes more and more popular.
- Accordingly, P2P participants include: investors (lenders), borrowers and P2P
companies that provide technology platforms to connect and support lenders and
borrowers (referred to as companies). P2P company). P2P lending company provides
an online trading platform for borrowers to directly connect loans with lenders. All
borrowing and repayment activities (principal, interest) between borrowers and
lenders are recorded and stored by the online transaction platform by electronic and
digitized tables.
- Peer-to-peer lending is made on the basis of information technology, companies
operating in this type use Big Data technology to collect all data of both lenders and
borrowers. and enjoy service fees from both investors and borrowers. In addition to
the above-mentioned information intermediary function, some P2P Lending
companies can provide services to support borrowers and lenders: customer
identification (e–KYC), credit scoring, identification loan price and collateral, loan
purchase/resale, debt recovery... .
- In essence, peer-to-peer lending is a financial activity aimed at the real needs of the
capital market, which transfers capital from areas of excess capital to places of
shortage of capital without intermediaries, connecting parties with idle capital. and the
party in need of capital through an online application or direct connection and enjoy
service fees. Peer-to-peer lending companies are not usually investors directly lending
money, but they create the connecting space as peer-to-peer lending platforms for
participants, while providing simple services. Simplify the lending and borrowing
process.
- In general, it can be understood that peer-to-peer lending is an activity based on a
financial technology platform (P2P lending) built on an online trading platform that
connects borrowers and lenders directly without through financial intermediaries. All
borrowing and debt repayment activities (principal and interest) between borrowers
and lenders are recorded and stored by the online transaction platform by electronic
and digitized tables.

PEER-TO-PEER LENDING ACTIVITIES IN VIETNAM.

Today, along with the development of information technology, mobile phones and
internet have become very popular with Vietnamese people.

Looking at Table 1, it is clear that the number of mobile subscribers in Vietnam is

very high and has increased in recent years. Due to special needs and changing social
trends, just over 1 million VND is available can buy a smartphone because the price
difference is increasing day by day

Therefore the ability to use technology is very easy and convenient. Similarly, the rate
of individuals using the Internet is also increasing, in 2018 the percentage of Internet
users in Vietnam was 70.35% of the population.

Table 1. Number of internet and mobile phone users in Vietnam

In Vietnam, the boom of many Fintech companies with the peer-to-peer lending
model started around 2014. Names like Tima, fiin, Vaymuon, etc. are prominent
companies in Vietnam. this activity.
Operational models of P2P lending companies in Vietnam:
Model 1: Companies that provide technology as intermediaries connect lenders and
borrowers. They provide technology platforms and take fees and cooperate with banks
in the field of payment and account management of customers at banks such as
Interloan Joint Stock Company in cooperation with 3 banks Sacombank, South Asia
Bank and Vietcapital Bank,...
Model 2: Banks will cooperate with P2P lending companies to lend to individuals,
small and medium-sized enterprises, or micro enterprises
Model 3: P2P lending companies raise capital themselves, then lend, this shows us
that it is similar to banking activities but must be licensed, so this behavior needs to
be controlled and prevented.
Model 4: pawn companies build their own apps and websites in association with
technology companies to apply in lending.
Peer-to-peer lending is a new financial activity based on technology. Although this
model offers benefits, it also comes with certain risks. In Vietnam, peer-to-peer
lending is still new, so the legal system does not have a separate management
regulation, but there is no ban on peer-to-peer lending. Therefore, it entails many
more complex problems that are difficult to solve. Currently, the peer-to-peer lending
model has many variations and violates the law on credit banking. If there is a dispute
over the non-recovery of the loans, investors can lose money that is difficult to hold
accountable from the companies providing the loans.

How to manage P2P effectively in VietNam?

From the experience of managing P2P Lending activities in some huge countries,
Vietnam can learn some useful lessons as follows:
+ First of all, it is important to recognize P2P Lending activities and allow the
operation of these companies.
The lack of a specific guideline for the establishment and organization of P2P
Lending activities has caused many difficulties for lending institutions. P2P Lending
regulations are generally considered to be quite complicated and troublesome,
especially for new entrants to this market.Therefore, it is necessary to soon be
concretized in the licensing of operations.
+ Second, there should be specific sanctions in the management of the P2P
Lending market.
While developing and perfecting appropriate management measures for the P2P
Lending market, the State Bank should issue clear regulations and direct credit
institutions to reform administrative procedures and be transparent. and publicize
information about its lending activities along with strengthening the implementation
of many preferential loan policies to create favorable conditions for all entities in the
economy to have access to bank capital.
+ Third, the management of P2P Lending activities should be strictly
implemented at both central and local levels.
Vietnam needs to develop a strict and specific monitoring mechanism for P2P
Lending activities. P2P Lending supervision should be delegated to the State Bank.
The State Bank is responsible for studying the operating model suitable to the