SMEs still have difficulty accessing loans

Many small enterprises participating in the “Connecting Banks with Enterprises” conference in HCMC pointed out their difficulties in applying for bank loans.

Despite a host of connection programs having been rolled out, the small firms are out of contention for low-cost capital from banks. Additionally, borrowing costs remain high.

A report from the State Bank of Vietnam (SBV) shows that credit offered to SMEs edges up annually.

In particular, the first three months of 2019 saw credit growing by 2.8% against end-2018, with the loans for SMEs amounting to VND1,307 trillion, up 15.6%. This figure made up 18% of total outstanding loans.

Of the total, 54% was offered to SMEs operating in commercial and service fields, 41% offered to firms in the industry and construction sectors, and 5% in the agro-forestry-fisheries sectors.

Nguyen Hoang Minh, deputy director of the central bank’s HCMC branch, said that the program to connect banks with enterprises has been in place in HCMC.

As of end-2018, commercial banks had disbursed loans worth VND260 trillion for more than 10,000 firms. The disbursed amount was VND9.4 trillion higher than the initially registered credit volume.

In 2019, 15 commercial banks have registered credit packages valued at VND270 trillion. In the year to March 31, these banks had disbursed VND9.1 trillion to over 1,000 customers.

In spite of the positive figures, many HCMC-based SMEs doing business related to driving products have had great difficulty borrowing from banks.

Nguyen Van Hau, director of finance at Dai Dung Metallic Manufacture Construction and Trade Corporation, said that his firm is in dire need of bank loans to ensure having the necessary capital to issue guarantees for participating in tenders and investing in many projects.

However, it has been impossible to avoid difficulties in the process of seeking bank loans, Hau said.

Banks and SMEs seemed not to understand each other’s problems related to mortgaged assets for loans.

Most manufacturing enterprises tend to hire or buy land in industrial parks for the long term. Meanwhile, banks do not treat the areas of land these enterprises are using as collateral for loans, as they are not granted land use right certificates, Hau said.

In addition, banks often require assets of high value mortgaged for small loans and fix high interest rates, hindering SMEs from accessing bank loans, Hau added.

In particular, mortgaged assets of firms operating in the agriculture sector are mainly farmland, which is valued far lower than normal. Loans provided for agricultural firms are often equal to half of the actual value of assets.

According to many banks, it is difficult to offer unsecured loans for SMEs, as well.

SBV deputy governor Dao Minh Tu said banks and enterprises should work together to find a way out. SBV would consider relaxing lending requirements so that SMEs can gain easier access to bank loans, Tu noted.

It will also increase loans for production and business activities, especially in the priority sectors, simplify lending procedures and diversify banking products and services.

Meanwhile, commercials banks should offer preferential interest rates and share risks with enterprises, Tu said.