Where did bank credit capital flow?

Dau Tu Chung Khoan

Lending rate dropped, banks offered more preferential credit packages but it was still difficult for SMEs to access.

To catch end of the year capital demands, banks offered different preferential credit package for customers, including individuals and SMEs.

For example, Kienlongbank provided a package of 400 billion dong with interest rate of 0.7 percent per month for any customers that need capital for production, real estate transaction, consumer, etc. From now to the end of the year, DongA Bank would also supply credit package of 1 trillion dong for SME located in District 5, 6, and Tan Binh (Hochiminh City) with intention of supporting enterprises for long term. ACB set target of credit growth at 18 percent in 2016, in which, individual would raise 25 percent, SME would raise 15 percent and large corporate only needed 5 percent growth.

Banks were promoting retail strategies and along with individual, SME would be targeted customers. However it was still difficult for SMEs to access this credit capital. It was blamed for the weak capacity, lacking of transparency, lacking of collateral of SMEs, which made bank afraid of rising bad debt.

Under circumstance of difficult market affecting corporate’s operation and slow bad debt handling process, many SMEs had to seek for non-bank credit with high interest rate. Thus, financial-economic experts requested more supporting mechanisms and large supporting fund for SMEs.

Tran Viet Anh, Commissioner of Hochiminh City Union of Business Associations (HUBA), said that banks had been more active in seeking customers to provide capital, but it did not mean all customers, especially SMEs, meet requirements; not to mention that interest rate applied for SMEs in middle and long term credit. Thus, without banks’ supporting, SMEs would face more and more difficulties.

Prof Dr Nguyen Mai, Chair of Vietnam’s Association of Foreign Invested Enterprises (VAFIE) also said that banking system had only financed 550,000 SMEs, 40,000 others had not been able to access banks’ capital. Hence, government’s target of 1 million SMEs in 2020 would not be easy to reach. Thus, more SME financial supporting policies and solution should be implemented, Mai added.

Under government’s SME supporting plan, SME Development Fund (SMEDF) with 2 trillion dong charter capital had been introduced by Ministry of Planning and Investment in April 2016. Right after that, this fund organised many activities to introduce and consult enterprises at North, Central and South. This fund had been ready to serve SMEs through three delegated banks BIDV, Vietcombank, HDBank.

According to Pham Quoc Thanh, deputy CEO of HDBank, banks would provide financial support to SMEs at the rate of 80 percent project value and collateral would be assets formed from loans or available asset, at fixed interest rate of 7 percent per year, free early repayment, etc.

According to Corporate Finance Department(Ministry of Finance), SMEs accounted for 98 percent total enterprises, contributed for 45 percent GDP, 33 percent total State revenue, provided 62 percent jobs. However, this sector had faced many challenges: small scale, lacking of human resources, lacking of capital for business development, limited managing capability, etc. In order to improve competitiveness and become motivation for the economy, SMEs would need capital to invest in technology and create high growth rate potential and the supporting of SMEDF would be a base for SME to develop.

However, financial experts argued that to improve current situation, aside from supports, SMEs themselves would need to endeavour to improve quality of business as well as transparency of business operation.

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