HANOI, Vietnam — Foreign banks trying to gain a foothold in booming Vietnam face a tough cultural barrier: Most people don't use banks and many don't trust them.

Instead, they stash their money at home and rely on informal lending networks of family and friends for loans.

"Banks require too much paperwork, and the charges are too high," said Cao Thi Dong, 40, a housekeeper. "If I borrow from people I know, I can get a much better interest rate."

Banks coming to Vietnam quickly learn that the fast-developing country is a striking blend of the ancient and the modern, a place where the traditional and the trendy exist side by side.

While luxury stores are springing up everywhere, most Vietnamese remain poor and fewer than 10 percent have bank accounts.

But a recent study by McKinsey & Co. found bright prospects for foreign banks, which have shown heightened interest in Vietnam since it joined the World Trade Organization earlier this year. For the first time, they will be allowed to open multiple branches, like their Vietnamese counterparts.

Vietnam's retail banking market is expected to grow between 15 percent and 20 percent a year, McKinsey said. And young Vietnamese, who make up more than 60 percent of the population, have much more positive attitudes toward banks than their parents and grandparents do.

Thomas Tobin, president and CEO of HSBC Vietnam, see signs of greater spending power everywhere.

"Stand on the streets of Hanoi or Ho Chi Minh City and watch the millions of motorbikes drive past," he said. "Everyone has a mobile phone. Everyone is really well dressed. Every day, you see more and more people able to participate in consumerism."

The challenge for HSBC and other banks lining up to do business in Vietnam is to lure members of Vietnam's emerging middle class into banks.

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 didn't 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."

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.

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

Foreign banks have been allowed to operate in Vietnam since the early 1990s, but there have been sharp restrictions on their operations. HSBC and a handful of others have single branches in Hanoi and Ho Chi Minh City, the nation's business hub.

Now, London-based HSBC plans to open additional branches in those two cities as well as new branches in Hai Phong, Can Tho and Danang. In all, HSBC hopes to open 10 to 15 branches within the next three to four years.

HSBC is still waiting for the government to approve its application, as are Standard Chartered PLC and Australia & New Zealand Banking Group Ltd.

Three other banks recently received preliminary approval: The Commonwealth Bank of Australia, the Industrial Bank of the Republic of Korea and Fubon Bank of Taiwan.

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