SMEs hard to access bank loans

The businesses’ ability to access loans fell from 45% in 2011-13 to 24 percent in 2015. The loans granted to the remaining 30 percent accounted for only 3 percent of total bank capital in the market.

The survey which was conducted by the Central Institute for Economic Management (CIEM) in co-operation with Copenhagen University and the Institute of Labour and Social Affairs at the end of last year was released at the Enterprise Connecting Day held in Hanoi last weekend.

Dau Anh Tuan, Head of the Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI) said its annual report showed that last year a record 110,100 businesses were established, representing a 16 percent year-on-year increase. The total registered capital of the firms hit 891.1 trillion VND or 48 percent higher than the previous year. 2016 also saw 26,689 companies resuming operations, up 24 percent from the previous year.

However, the report also said that the rate of businesses facing difficulties in accessing bank loans was 44 percent. The interest rate for big firms was 7 percent a year while that for SMEs was more than 8 percent.

The report shows that SMEs faced difficulties in accessing bank loans and were charged higher interest rates, Tuan said.

He added that 87 percent of businesses have had difficulties in mortgage assets, 66 percent complained about high interest rate and lending conditions while 51 percent believed that lending procedures were complicated.

“In addition to difficulties in accessing bank loans, SMEs have faced troubles in seeking customers, suitable human resources and cumbersome administrative procedures,” said Pham Hoang Tien, director of VCCI’s SMEs Promotion Centre.

Hoang Xuan Hai, director of VAG International Joint Stock Company which specialises in producing and exporting towels said many banks took meetings with him to discuss his company. However, they refused his loan applications as his company did not have assets for mortgage.

Sharing the ideas, Bui Thi Hong Ha from CPART Company, which develops microbiological lines for environmental protection, husbandry and cultivation said their products have big potential, especially for exports to Laos.

However, they have had difficulties in accessing bank loans, with the cumbersome procedures requiring several meetings.

Dao Gia Hung, deputy director of the Vietnam Prosperity Bank (VPBank)’s SMEs Division, said there are problems in the market that keep banks and businesses apart.

“However, VPBank has provided support to remove capital barriers for the development of SMEs,” Hung said, adding that the bank has offered many credit products for SMEs and micro firms.

VPBank does not require complicated administrative procedures and uses experienced bank staffers to inspect businesses’ operations to grant loans quickly.

He added that providing loans to enterprises meant risks in payment. VPBank therefore has always paid attention to improving its risk management. It has built infrastructure to control risks, with staff members consulting businesses after loans are approved.

“Over the past few years, risks relating to the bank’s loans to SMEs have been under control,” he said.

Le Dang Doanh added that SMEs should get more involved in value chains and deepen international integration.