Hanoi (VNS/VNA) -Peer-to-peer (P2P) lending companies expect that the sandbox for fintech wouldeliminate unscrupulous businesses and help the market grow significantly.

A regulatory sandbox is a frameworkset up by a regulator that allows FinTech startups and other innovators toconduct live experiments in a controlled environment under a regulator’ssupervision. 

Prime Minister Nguyen Xuan Phuc hasrequested the State Bank of Vietnam (SBV) to develop a regulatorysandbox for P2P lending to help SMEs gain access to loans.

The information was welcomed byfintech firms operating in the sector.

Nguyen Hoa Binh, chairman ofNextTech Group, which is operating vaymuon.vn in the P2Plending sector, told Vietnam News that the nature of the P2Pmodel was very good.

However, due to the absence of aregulatory framework while many Vietnamese start-ups operating in thisfield have crept up, foreign loan applications have jumped in, hiding under P2Pand boosting black credit lending.

“A lack of a legal framework hasmade Vietnam a fertile environment for malicious and disguised P2P models,while genuine P2P companies are overwhelmed. Therefore, having a legalcorridor, even a piloted one, is essential to protect both borrowers and theP2P businesses,” Binh said.

Statistics from the SBV showed thatthe country now has 40 P2P companies. However, in reality, there are more than100 apps operating under the P2P model. Of which, 70 percent are operated byforeign firms.

These apps advertise to operateunder the P2P model, but are actually offering ‘black’ credit, like theCashwagon app that was discovered by police in early June.

“The potential for development ofthe P2P market in Vietnam is huge due to high demand of borrowers. In fact,this model is not new, but has existed for thousands of years in the formof borrowing from relatives and friends.

"P2P is just the “digitalisation”of this relationship. The introduction of this model, if well managed, wouldpromote comprehensive finance, giving people, households and SMEs moreopportunities to access financial services at low cost and with lessprocedures,” he added.

However, he said each model has itsown risks. For P2P, the biggest risk comes to investors or lenders.

“The sandbox should be soonpromulgated to screen the market. P2P companies also need to improve theirclients' appraisal and credit rating before transferring that opportunity toinvestors. P2P businesses with good appraisals would be able to controlinvestors' risks,” he added.

Economist Nguyen Tri Hieu said alack of a legal corridor is causing turmoil in the P2P market. Many online loanapplications impersonate P2P and disruptive activities, causing consequencesfor this form of lending.

“It is necessary to introduce asandbox for the P2P model. However, in my opinion, it should only be tested forone year, instead of extending to two years as in the current draft of thecentral bank.” 

He added the issuance of the sandboxwould help purify the P2P market, provide authorities with the basis to handledozens of disguised black credit apps and firms impersonating P2P.

He also agreed that the P2P marketin Vietnam has big potential because there are many people who do not haveaccess to formal credit. With the advantage of quick disbursement and nomortgage required, P2P is an effective capital channel for low-income people.

Economist Can Van Luc said P2P isvital trend of a digital economy and would strongly develop in Vietnam. P2P issocialising credit services. This was the reason why the sandbox would helpbetter protect investors and borrowers while increasing opportunities to accessloans.

P2P in Vietnam still has a lot ofroom for development, which is necessary to complement credit and financialcompanies. 

The banking system would be extendedto remote areas thanks to the agent network. However, this system ofagents only performs a limited number of operations and cannot replace banksfor credit development. In other words, with nearly 100 million people in Vietnam,the P2P market is still very attractive./.