"Thirst" for capital in the middle of the price vortex

The high cost of raw materials and logistics has affected the profit margins of many textile and garment enterprises. Illustration: H.Diu

Trying to maintain production

As reflected by textile enterprises, in the first five months of 2022, the average price of imported yarn increased by 10% over the same period last year, due to the increase in cotton and oil prices, along with high anchoring logistics costs. This leads to an increase in fabric costs, which significantly affects the gross profit margin of domestic manufacturing companies - especially those that have the majority of FOB orders (manufacturing orders in the form of purchasing raw materials - semi-finished products).

Similarly, with wood industry enterprises, tensions between Russia and Western countries have led Russia to issue a ban on exporting logs to European countries and the US, leading to a shortage of raw wood supplies globally, leading to an increase in the price of raw materials. According to Trading Economics, the price of American lumber has increased by 25% compared to the beginning of the year, leading to a decrease in the value of imported wood materials in Vietnam compared to the previous year. Experts at VnDirect Securities Company forecast that the gross profit margin of domestic wood and furniture companies will continue to decrease by 0.4-0.6 percentage points over the same period in 2022, due to input materials. input and increased logistics costs.

Also on this issue, according to Ly Kim Chi, Chairman of Ho Chi Minh City Food and Food Association, the price of input materials for production is increasing, with some items increasing by more than 40%, along with high gasoline prices. The record makes it difficult for businesses not only in terms of supply but also in terms of capital to buy raw materials, as well as to pay production costs. Ly Kim Chi for example, if before, businesses only needed about VND100 billion to stockpile raw materials, now the cost increases, pushing the reserve money by 50%, which means VND150 billion is needed. Therefore, businesses are in dire need of more capital for production, because if businesses apply the price, it will certainly push up the selling price of products, leading to pressure on inflation.

"Food and food businesses are facing many difficulties, must use other capital mobilization channels to maintain production up to this point," Ms. Chi emphasized.

In fact, food and food are essential commodities. If the price increases, it will affect purchasing power and affect inflation. Therefore, many businesses said that in the past time, the food and food industry maintained the price level, implemented stabilization programs, and prevented inflation from rising. Although the food and food industry is enjoying preferential interest rates, according to businesses, it is not possible to fully offset the increasing costs.

A representative of the transport-tourism industry said that as the business's capital source is mainly from shareholder loans or prepaid tour customers, the business has no collateral, so it has to borrow money. Unsecured loans with interest rates of up to 13-14%/month, this interest rate is only enough for businesses to hold on, to ensure sufficient vehicles and employees' salaries, so it is difficult to ensure profits in the current context.

On the other hand, another problem today is the fact that banks with money cannot lend to businesses because they are "stuck" in the credit growth limit (room). Therefore, many banks are "waiting" for the State Bank of Vietnam (SBV) to soon extend the credit room so that banks have more room to disburse credit packages, including preferential credit.

Need to clear the bottleneck on capital

SBV has issued a circular guiding the 2% interest rate support from the state budget according to Decree 31 of the Government. Therefore, many banks have started to implement this support package and have been approved by the SBV to provide credit support for businesses, cooperatives and business households. Specifically, Agribank announced that it has approved the interest rate support limit of 2%/year with an expected size of VND2,500 billion in 2022 for those eligible for interest rate support. ABBank approved VND264 billion to support interest rate reduction. Correspondingly, there will be about VND13,000 billion of outstanding loans that will be preferential. With VietinBank, about 30% of the total credit size of banks in the group can be reduced interest rates according to Decree 31. Therefore, this bank is set aside VND7,000 billion to support interest rate reductions this year and next year.

However, access to capital is still a big problem for businesses. A representative of Tan Quang Minh Production and Trading Co., Ltd. said that accessing this capital is very difficult, even with the 2% loan interest rate support program, businesses do not know how to continue. reachable.

At the recent question-and-answer session at the National Assembly, Governor Nguyen Thi Hong said that small and medium-sized enterprises account for 97% of the total number of businesses in the economy. This group of businesses has many limited conditions such as finance, management ability, and brand name, so the credit rating is not high. Credit institutions must assess their credit in order to offer an appropriate interest rate, the interest rate for low credit enterprises must be higher than that of high credit enterprises. Businesses with many limitations will not be eligible to borrow capital from banks, because credit institutions must follow the principle of borrowing capital, and customers must ensure the ability to repay, because the loan is also mobilization of the people.

Facing current difficulties, businesses still need more specific and preferential policies to increase access to capital. Ly Kim Chi suggested that commercial banks have the policy to re-evaluate the value of collateral to increase the disbursement limit, helping businesses have more capital, especially those that do well. A representative of a food production enterprise said that businesses need to get long-term loans, banks to increase lending levels and implement policies faster so that businesses can have more capital for production and business.

Along with that, banks are also "eagerly" proposing the SBV to increase the credit room or maybe have policies to support banks, excluding loans under the 2% interest rate support program from the credit room calculation. Mr. Nguyen Quoc Hung, General Secretary of the Bankers Association, said that the capital needs and growth of credit room of banks are very large. Therefore, it is necessary to balance the inflation level to provide a reasonable credit growth threshold, otherwise it will be difficult for banks when conditions are sufficient but cannot disburse due to the lack of room.