Preferential credit packages need to be implemented for start-up enterprises

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What are the reasons for difficulties in approaching capital of start-up enterprises?

One most common characteristic of start-up enterprises is from creative ideas, basing on high technology, scientific knowledge and business in new fields. Thus, these ideas often lack experience, thereby success is likely to be relatively low. In current conditions, the banks cannot afford to evaluate the actual efficiency of those ideas as well as the needs of output markets for these new ideas. Moreover, there are not any independent specialized agencies and associations to evaluate the efficiency of new business and production ideas. Therefore, there is insufficient basis for banks to assess business plans. Most banks want to closely manage risks and do not let bad debts occur, the ability to access capital by start-up enterprises is limited.

Besides, most start-up companies do not have collateral assets. While in the process of bank credit issuance, except reputable enterprises and enterprises which have good business efficiency must be trusted, most loans from banks require collateral assets to minimize the risk of capital loss. Meanwhile, the business ideas of start-up enterprises are not collateral assets to mortgage with banks. Hence, it is difficult for banks to provide credit due to not ensuring conditions for risk management.

In addition, start-up enterprises also face many difficulties in legal procedures due to not having an enterprise operation and administration apparatus. Thereby, the credit issuance of banks for enterprises will be restricted due to obstacles on procedures. Besides, the lack of transparency in financial statements, property and tax statements of start-up enterprises also increases the risks for banks to grant credit. Thus, in the current credit crunch, banks will become stricter in the evaluation for enterprises to reduce the risk of capital loss.

How to remove the above obstacles, Sir?

In my opinion, the best way is to establish and put venture capital funds into operation. The venture capital funds also need capital contribution from banks, thereby meeting the needs of loans to start-up businesses. Currently, the access to bank loans is difficult and faces many obstacles, with experience from developed countries in the world, I found that the operations of venture capital funds in this field are most suitable.

The venture capital funds meet the capital needs of businesses as well as an acceptable risk at higher level than that prescribed by the banking system. Hence, the appearance of venture capital funds can solve the problems on capital for start-up enterprises, and can support and give advice on output markets, legal records, enterprise administration, tax declarations and financial statements ensuring enterprises have the basis to operate effectively. Currently, the SBV HCM City branch is drafting regulations on the establishment of venture capital funds and calls banks to contribute capital. Until now, there are 4-5 banks registered to join venture capital funds. It is expected by the end of the first quarter of 2017, this draft will be submitted to the Governor of the SBV and the HCMC People's Committee for consideration and deployment.

Also, I think that trustworthy specialized centers should be established to evaluate and assess objectively and scientifically all projects and creative ideas especially ideas on modern science and technique application and assessment on output markets of new products and services. This will be a solid foundation to support banks in appraisal of business projects and increases opportunities and capital accessibility for enterprises. With the assessment of high scientific content, banks will find it easier to decide credit issuance and finance for new business projects and ideas.

Besides measures mentioned above, the State should have preferential policies, reduce involved legal procedures and establish support and consultancy centers for start-up enterprises, and deploy preferential credit packages for start-up businesses.

Please tell me more clearly about preferential credit packages, and is Ho Chi Minh City going to deploy any preferential credit packages for start-up enterprises?

Presently, banks in HCM City have agreed to provide a preferential credit package for start-up businesses in the priority field and industries with reasonable interest rates and focusing on the project on entrepreneurship in other industries in the coming time, the SBV Ho Chi Minh City branch will announce this credit package, not only for 2017 but also for following years.

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Furthermore, through 5 years of successful deployment, the bank – enterprise connection program also supported many small and medium size enterprises to access cheap preferential loans of banks. In 2017, the program will continue to be deployed with one of the main keys which are start-up enterprises in some priority and key fields, start-up enterprises with creative ideas and scientific and technical applications. These will be useful resources to support these enterprises to develop and take new business ideas into practical market, reducing pressure on bank liabilities, thereby investing for development more effectively

Thank you,