My Online Journal

There is an interesting article on iht today about the difficulties that foreign banks face when doing business in Vietnam. It points out: "Foreign banks trying to gain a foothold in booming Vietnam face a tough cultural barrier: Most people do not use banks and many do not trust them."
Here is the example: "

As the competition heats up, they will be searching for ways to attract customers such as Nguyen Thi Tuyet Mai, 31, an accountant who just borrowed $28,000 from friends and family to build a house in Hanoi.

Even though she already has a bank account and an ATM card, Mai did not even think about going to a bank for a loan. Instead, she and her husband borrowed money from five family members and five friends, none of whom will charge them interest.

"I trust banks," Mai said. "But my first choice is always to borrow from friends and family. It's more comfortable, more personal."

And unlike a bank lending officer, Mai said, her family members would never turn down her loan application.

"It's their responsibility to support me," Mai said. "I have the same responsibility to them."

And here is the reason: "

Many Vietnamese, especially those who live in the countryside, have developed lending networks known as "phuongs," informal banks made up of family and friends.

Members of these groups contribute a few hundred dollars to a pool, then take turns borrowing the money, usually enough for a motorbike or some home renovations.

They gather twice a year for tea and conversation and to decide who will borrow the money and how much interest they will pay.

The phuong system is built on long-term relationships and mutual trust. People do not default on their payments because if they did, they would be ostracized from the village.

"If you cheat, you could never come home," said Dong, the housekeeper, whose phuong includes 17 people from her rural hometown. "You would have no roots, no family."

While such networks continue to flourish, foreign banks are betting that Vietnamese consumers will rely more on modern financial institutions as their incomes grow."

Personally, I think it's an interesting article. The reporter seems to understand Vietnamese people rather well. "Phuong", "ho" or "hui", as it's sometimes called, are common in Vietnam.

However, I do think that bank services in Vietnam is not good enough to gain the trust of the people. ATM often run out of money at weekends and mistakes in doing the withdraw are quite common. POSs that accept credit cards are not common, even in big cities like Hanoi and HCM City. ATM serves as an electronic pulse only. They still have to withdraw money for making the purchase!

To read the complete article, visit here!