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getting credit

Through two sets of indicators, Doing Business assesses the legal rights of borrowers and lenders with respect to secured transactions and the sharing of credit information. The depth of credit information index measures rules and practices affecting the coverage, scope and accessibility of credit information available through either a public credit registry or a private credit bureau. Credit information systems mitigate the 'information asymmetry’ in lending and enable lenders to view a borrower’s financial history (positive or negative), providing them with valuable information to consider when assessing risk.

 

 

 

Credit information systems benefit borrowers as well, allowing good borrowers to establish a reputable credit, history which enable them to access credit more easily. The Legal Rights Index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. Sound collateral law will enable business to use their assets, especially movable property, as security to generate capital while having strong creditor’s rights has been associated with higher ratios, of private sector credit to GPP.

Some reform outcomes

After Vietnam's new Civil Code was enacted in 200, a decree further clarified the provisions governing secured transactions. Since the inclusion of the new provisions, the number of registrations increased from 43,000 (2005) to 120,000 (end of 2008).                                                                                  

In 2008, when Zambia established a private credit bureau, its database initially covered about 25,000 borrowers. Thanks to a strong communication campaign and a central bank directive, coverage has grown 10-fold in the past 2 years, exceeding 200,000 by the beginning of 2010.

 

 

Case Study Assumptions

The Debtor

*        Is a Private Limited Liability Company

*        Has its Headquarters and only base of operations in the largest business city

*         Obtains a loan from a local bank (the Creditor) for an amount up to 10 times income (GNI) per capita

*         Both creditor and debtor are 100% domestically owned

1. Benchmarking Getting Credit Regulations

Vietnam is ranked 15 overall for Getting Credit.

Ranking of Vietnam in Getting Credit - Compared to good practice and selected economies

The following table shows Protecting Investors data for Vietnam compared to good practice and comparator economies

2. Historical data: Getting Credit in Vietnam

3. Getting Credit sub indicators in Vietnam over the past 4 years

4. Details on Getting Credit in Vietnam

The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Vietnam.

 

 

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