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Possibility of the Expansion of Business Scope for Finance Companies in Vietnam

2025.03.17

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:

<table cellpadding="8px" style="width:100%; border:1px solid #bbb; border-collapse:collapse;" width="100%">
	<tbody>
		<tr>
			<td align="center" rowspan="2" style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242);border-top: 2px solid #cc0000; padding-right: 12px; padding-left: 12px;" valign="middle" width="52%"></td>
			<td align="center" rowspan="2" style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242);border-top: 2px solid #cc0000; padding-right: 12px; padding-left: 12px;" valign="middle" width="12%">General Finance Company</td>
			<td align="center" colspan="3" style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242);border-top: 2px solid #cc0000; padding-right: 12px; padding-left: 12px;" valign="middle" width="12%">Specialized Finance Company</td>
		</tr>
		<tr>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242);border-top: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle" width="12%">Factoring Finance Company</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242);border-top: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle" width="12%">Consumer Credit Finance Company</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242);border-top: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle" width="12%">Financial Leasing Company </td>
		</tr>
		<tr>
			<td align="left" colspan="5" style="border: 1px solid rgb(187, 187, 187); background-color: #fdf3f3; padding-right: 12px; padding-left: 12px;" valign="middle">Permitted Banking Operations</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Receipt of demand deposits and time deposits of organizations</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Issuance of certificates of deposit to raise capital from organization</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Provision of loans</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Bank guarantees</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Discounts and rediscounts of negotiable instruments and other valuable papers</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Issuance of credit cards</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Factoring</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Financial leasing</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Other forms of credit extension as prescribed by SBV</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
		</tr>
		<tr>
			<td align="left" colspan="5" style="border: 1px solid rgb(187, 187, 187); background-color: #fdf3f3; padding-right: 12px; padding-left: 12px;" valign="middle">Other activities</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Receiving entrusted capital from organizations and individuals to carry out permitted credit extension activities</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Entrusting capital to another credit institution to carry out credit extension activities</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" colspan="3" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O 
			(for credit extension activities of 
			such specialized company) </td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Purchase and sale of SBV’s bills, and:</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">corporate bonds and other valuable papers</td>
			<td align="center" colspan="3" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">certificates of deposit issued domestically by credit institutions and foreign bank branches</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Foreign exchange trading and the provision of foreign exchange services</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Provision of services for management and preservation of assets of clients</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Other services related to factoring</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">X</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Consultancy services on banking operations and other business activities specified in the license</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Purchase and sale of government debt instruments, government-guaranteed bonds and local government bonds</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Issuance of bonds to raise capital from organizations</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
		</tr>
		<tr>
			<td align="left" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle">Insurance agency services</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
			<td align="center" style="border: 1px solid rgb(187, 187, 187); padding-right: 12px; padding-left: 12px;" valign="middle; top;">O</td>
		</tr>
	</tbody>
</table>
 
 
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: 
 
<div style="background: rgb(238, 238, 238); border: 1px solid rgb(204, 204, 204); padding: 24px;">
<ul>
	<li>Implementing an internal control framework in compliance with the new classification requirements;</li>
	<li>Maintaining the statutory minimum capital for the new classification as of the prior fiscal year;</li>
	<li>Demonstrating profitability over the past two years;</li>
	<li>Meeting capital adequacy and other prudential regulations within the past 12 months;</li>
	<li>Ensuring proper asset classification and reserve maintenance during the past 12 months; and</li>
	<li>Having no administrative penalties for violations of banking or financial regulations within the past 12 months</li>
</ul>
</div>
 
 
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. 
 
<hr align="left" background-color="#cc0000" size="1" width="33%" />
<div style="line-height: 110%;">1 Articles 115, 119, 120 and 124 of LCI 2024.</div>

<div style="background:#eeeeee;border:0.5px solid #cccccc; padding:24px">
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