JIPYONG LLC

Introduction

Vietnam’s Law on Credit Institutions (“LCI 2024”) governs the establishment and operation of non-banking credit institutions, including finance companies.  LCI 2024 provides the legal foundation for the State Bank of Vietnam (“SBV”) to issue detailed regulatory guidelines through its circulars.  The previous version of the law, LCI 2010, was amended several times before being fully revised in 2024.

Having come into effect July 1, 2024, LCI 2024 introduced a new framework classifying and regulating finance companies.  Namely, a distinction is made between general finance companies and specialized finance companies.  Accordingly, SBV issued new circulars outlining the procedures for updating licenses and expanding the business scope of current finance and financial leasing companies.  This development allows both domestic and foreign-invested finance companies to explore operation expansion opportunities.


Past Limitations on Business Activities of Finance Companies Before LCI 2024

LCI 2010 had classified non-banking credit institutions as “finance company” and “financial leasing company”.  Decree 39/2014/ND-CP of Vietnam government (“Decree39”) went further by making a distinction between “general finance company” and “specialized finance company” —the latter category including factoring, consumer finance, and financial leasing company.  Thereafter, SBV set out licensing procedures for these finance company categories with Circular 30/2015/TT-NHNN (“Circular 30”).

To date, Vietnam has had 16 finance companies and 10 financial leasing companies under the abovementioned legal framework.  While a few general finance companies were authorized to conduct factoring, consumer finance, and financial leasing activities, most other finance companies—including foreign-invested ones—were limited to conduct only consumer finance activities.  Non-general finance companies were also restricted to consumer finance activities, thus requiring the establishment of separate financial leasing companies to conduct leasing business activities.


Classification of Finance Companies under LCI 2024

LCI 2024 inherits and codifies Decree 39’s classification of finance companies and stipulates business activities of each category of finance companies as follows¹:

 

	General Finance Company	Specialized Finance Company
		Factoring Finance Company	Consumer Credit Finance Company	Financial Leasing Company
Permitted Banking Operations
Receipt of demand deposits and time deposits of organizations	O	O	O	O
Issuance of certificates of deposit to raise capital from organization	O	O	O	O
Provision of loans	O	O	O	O
Bank guarantees	O	X	X	X
Discounts and rediscounts of negotiable instruments and other valuable papers	O	O	O	X
Issuance of credit cards	O	X	O	X
Factoring	O	O	X	X
Financial leasing	O	X	X	O
Other forms of credit extension as prescribed by SBV	O	O	O	O
Other activities
Receiving entrusted capital from organizations and individuals to carry out permitted credit extension activities	O	O	O	O
Entrusting capital to another credit institution to carry out credit extension activities	O	O (for credit extension activities of such specialized company)
Purchase and sale of SBV’s bills, and:	corporate bonds and other valuable papers	certificates of deposit issued domestically by credit institutions and foreign bank branches
Foreign exchange trading and the provision of foreign exchange services	O	O	O	O
Provision of services for management and preservation of assets of clients	O	X	X	X
Other services related to factoring	O	O	X	X
Consultancy services on banking operations and other business activities specified in the license	O	O	O	O
Purchase and sale of government debt instruments, government-guaranteed bonds and local government bonds	O	O	O	O
Issuance of bonds to raise capital from organizations	O	O	O	O
Insurance agency services	O	O	O	O

Expansion of Business Scope for Finance Companies

To facilitate the transition from LCI 2010 to LCI 2024, SBV issued Circular 35/2024/TT-NHNN (“Circular 35”), effective from July 1, 2024.  Circular 35 outlines the procedures for renewing existing licenses, incorporating key procedures under Circular 30 and LCI 2010, as well as reflecting the classifications and business activity scopes within the new LCI 2024.  Under Circular 35, a finance company can apply for SBV approval to broaden their business activities or renew their current license obtained before LCI 2024.

Recently, SBV issued Circular 62/2024/TT-NHNN (“Circular 62”), effective from February 17, 2025, which provides guidance on governing the reclassification and conversion of general finance companies into specialized finance companies, and vice versa.  This marks a meaningful regulatory shift, as Decree 39 previously allowed only the conversion of a finance company into a financial leasing company, while prohibiting the reverse.

For reclassification, Circular 62 requires the following conditions to be satisfied:
 

Conclusion

Circular 35 and Circular 62 are expected to drive regulatory changes to Vietnam’s finance sector.  That said, SBV and forthcoming guidance will determine the degree and magnitude of change due to the lack of precedents and practical experience.

As such, finance companies, particularly those seeking to expand their business scope or transition between classifications, must closely monitor the evolving regulatory landscape.  Given the complexity of these changes, stakeholders should engage in proactive regulatory assessments and compliance preparations to maximize their strategic opportunities under LCI 2024.
 

---