By Hau Lee (Stanford), Jawad Masood (UCLA), and Christopher Tang (UCLA)
Like many developing countries, access to credit for middle and lower classes through formal banking channels is limited in Vietnam. With a population of more than 90 million, there is only one bank branch for 30,000 people and only 20 percent of the population owns bank accounts. Hence, lower- and middle- class Vietnamese citizens have very limited access to credit lending. By the end of 2011, there were one million credit cards issued in Vietnam only to the high-income class because of the absence of a personal credit bureau. Consequently, Vietnam's poor and rapidly expanding middle class have very limited access to credit because they are considered high-risk customers due to lack of a formal credit history.
To meet this untapped demand in a market with inadequate banking infrastructure, MobiVi has come up with an innovative service -- Employee Charge Cards (ECC) -- that is intended to meet this need by harnessing the power of modern telecommunications technology. Founded in August 2007, MobiVi became the first "non-bank organization" licensed by the State Bank of Vietnam to provide electronic payment services. The salient features of the financial services that ECC provides are:
Transactions: ECC is akin to an online "cash advance" service
that allows all employees of a participating company to use a line of credit (a
certain percent of his/her monthly salary) to purchase products (prepaid
cellphone cards, travel and entertainment, bill payment) from MobiVi's
authorized partner vendors. The key benefit for the employee is that even if
s/he is running short on cash, s/he does not need to wait for cash salary
disbursement next month in order to make necessary purchases.
Payments: ECC users can buy a variety of products like household
appliances, consumer electronics, fashion and lifestyle products, travel
packages, etc. from MobiVi partners while paying back in three to six month
installments. The partner vendors, which include some of Vietnam's top
nationwide vendors, provide high-quality products and sound customer service.
- Cash Advance: Cash advances are available for ECC users in denominations of $12, $25, $50, and $100. These can be disbursed through SMS or the Web through Mobile Money.
Ultimately, MobiVi uses the employee's future salary as collateral, while keeping interest rates lower than what borrowers would usually pay an informal credit provider. When Electronic Financial Transaction (EFT) Service is relatively new in Vietnam and when most daily transactions are conducted in cash, will MobiVi break new ground? Only time will tell! For more details, the reader is referred to the Stanford University Graduate School of Business Case (GS-82) prepared by Hau Lee, Jawad Masood and Christopher Tang for details.