Advice on developing Vietnam's financial market

The Vietnamese financial market has made remarkable progress in recent years, playing an increasingly important role in the economy . Beyond the banking system, the financial system has also developed comprehensively and diversified with the stock market, insurance, and other non-bank financial institutions.

A colorful financial picture

According to the University of Banking Ho Chi Minh City, since Vietnam's Financial Development Index (FD) was first published in the International Monetary Fund (IMF) data, the FD index has shown an upward trend from 1992 to 2021. In 2021, the index reached 0.38 points, ranking 59th out of 183 countries, only behind the European group (0.5 points) and the developed market group (0.62 points); higher than the world average (0.32 points) and significantly higher than the group of low-income and developing countries (0.15) in terms of the overall development of the financial system. Within the ASEAN region, Vietnam's financial development level according to the FD index is comparable to the Philippines (0.38 points) and significantly higher than Thailand (0.73 points), Malaysia (0.73 points), and Singapore (0.7 points).

Private sector credit as a percentage of GDP has grown strongly over the past 15 years, from 82.87% of GDP (2008) to 132.75% of GDP (2003). Vietnam's private sector credit as a percentage of GDP is among the highest in the world. Conversely, the ratio of insurance premiums to GDP, the ratio of investment fund assets to GDP, and the ratio of pension fund assets to GDP are very low, indicating significant pressure on commercial banks in particular and credit institutions in general.

Regarding access to financial institutions and financial markets, the Vietnamese credit institution system over the past 15 years (2006-2021) has seen significant growth in the number of ATMs (eightfold increase) and a certain number of bank branches, aiming to maximize customer access to financial products and services.

From an organizational perspective, Vietnamese financial institutions, specifically the banking sector, operate quite efficiently and achieve high levels compared to other ASEAN countries. However, from a market perspective and for non-bank financial institutions, Vietnam's operational efficiency needs further improvement in the future.

A scientific report by Dr. Nguyen Anh Vu and Dr. Trieu Kim Lanh (Ho Chi Minh City University of Banking) also suggests that the Vietnamese financial system has experienced significant growth over the past 15 years.

Credit increased 3.5 times (2013-2023); insurance premium revenue increased 10.7 times; market capitalization and stock trading value increased an average of 25 times. However, the development in depth across the three main pillars—banking, insurance, and securities—is still uneven. Capital flows in the economy mainly circulate within the banking sector.

Specifically, in 2023, credit accounted for 136.9% of GDP, while the insurance sector only accounted for an average of about 2% of GDP. The market capitalization and trading volume on the stock market were relatively large (58.08% and 43.02% of GDP), but the scale of capital mobilization from the stock market remained limited. The ratio of total assets of investment funds to GDP only reached 0.65%, and voluntary supplementary pension funds were still in their nascent stages with small scales.

This indicates that the concentration of capital and the dependence on the banking system for capital supply in the economy remain significant. There is still considerable room for growth in the insurance sector and the stock market in the future, with great potential.

Vietnam's banking sector is considered to be quite efficient and performs well compared to other countries in the region. Photo: LAM GIANG

Finding solutions to develop the capital market.

In light of these realities, the Ho Chi Minh City University of Banking is organizing a scientific conference (FINHUB 2024) with the theme "Sustainable Development of Vietnam's Financial Market," an event sponsored by the Nguoi Lao Dong Newspaper.

The official seminar, scheduled for July 18th, will bring together experts from various universities, research institutes, financial institutions, associations, and regulatory agencies. These experts will share and discuss research findings, as well as business practices and management practices related to the overall Vietnamese financial market.

"With the gathering of reputable experts, FINHUB 2024 will contribute to assessing the current situation, potential, and identifying risks, thereby proposing solutions for the sustainable and comprehensive development of Vietnam's financial system, ensuring capital needs for economic development, guaranteeing system safety and stability, and social welfare," - Associate Professor Dr. Nguyen Duc Trung, Rector of the University of Banking Ho Chi Minh City, observed.

According to Dr. Nguyen Anh Vu - Head of the Finance Department at the Ho Chi Minh City University of Banking, and Deputy Head of the Organizing Committee of FINHUB 2024 - the reports at the conference will focus on discussing several key topics such as: an overall assessment of the scale, structure, and level of financial development in Vietnam; an assessment of the current state of operations, risk identification, and development potential of the system of credit institutions, the stock market, and insurance; market discipline and models for supervising the financial system; and the impact of external shocks and internal issues on the Vietnamese financial market.

Experts will also present solutions for developing the capital market and non-bank financial institutions; solutions for upgrading the Vietnamese stock market; financial innovation and the development of new financial products and services; green finance, sustainable finance and sustainable financing methods; financial integration and solutions for building an international financial center in Vietnam; digital transformation and the application of technology in the financial sector.

According to Associate Professor Dr. Nguyen Duc Trung, FINHUB 2024 is organized based on a model that closely links scientific content with practical value. Launched at the beginning of 2024, FINHUB 2024 has attracted the attention and participation of scientists from all over the country in submitting papers.

After undergoing an independent peer review process, 28 of the best quality articles were selected for publication in the full text of the proceedings; these articles will then be further selected for publication in the Asian Journal of Economics (AJEB).

Source: https://nld.com.vn/hien-ke-phat-trien-thi-truong-tai-chinh-viet-nam-196240717193450573.htm