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Businesses dying because of capital starvation
Businesses lack capital while banks cannot lend capital to businesses with the credit growth rate capped at 30%.
Huynh Kim Phuong, Director of Vietcombank Can Tho branch, said that the bank well knows that businesses are thirsty for capital to expand production. However, as the credit growth rate is capped at 30%, Vietcombank can only provide loans in dribs and drabs and look on as businesses starve from lack of capital.
Tran Thanh Van, Deputy Director of Gentraco, said that his company reached its credit limit two months ago.
The tightened credit policy has been making everyone suffer. The director of a seafood company in Tra Noc Industrial Zone in Can Tho city said: “We owe money to farmers, while farmers, in their turn, owe money to the sellers of food for fish.”
Companies say that they have used up all their credit, but they still need more and more capital. The problem lies in the fact that the previously set credit limits prove to be nothing compared to the price increases. Previously, rice exporters could purchase 1,000 tonnes of paddies from farmers with borrowed money, while they can now only purchase half the volume with the same sum of money.
According to the Can Tho Fertiliser and Chemical Joint Stock Company, as the material prices have been skyrocketing, the company needs a big volume of capital to make NPK fertiliser. With the same amount of capital it could borrow in previous years, it can buy only 50% of the materials needed this year.
Le Van Tam, Director of Viet A Bank’s Can Tho branch, said that Viet A has enough money to lend to businesses. However, not many businesses can afford the high interest rate of 1.6-1.7%/month (19.2% per annum).
Meanwhile, export companies which want to reduce capital borrowing costs by borrowing money in US$, now cannot do that, as the new decision on providing foreign currency loans sets very strict requirements on US$ borrowers. Tran Chi Gia, the director of Meko garment export company, says that he cannot get US$ loans anymore, though the company has income in US$, so it could pay its debt off. Currently, he has to borrow money at 1.6% per month, which is killing the company’s competitiveness.
The tightened credit policy of banks has been making production and business stagnate, as Vietnamese companies, which have small capital, have been relying on bank capital to survive. Bui Huu Tri, Chairman of Can Tho Seafood Association, said that every fish farmer has to borrow 80-90%, sometimes 100% of capital needed for farming.
Phan Van Danh, Chairman of An Giang Seafood Association, said: “Fish farmers are weeping because of capital shortage. In order to farm 100 tonnes of material fish, farmers need VND1.6bil, while they can arrange 1/3-1/5 of the sum only. Where can they borrow money now if banks refuse to provide loans?”
Nguyen Thanh Tam, a fish farmer in Thot Not district in Can Tho city, said that his loan has matured and he has to pay his debt, but he has decided not to pay at this moment, fearing that he won’t get loans anymore, though he well knows that he will have to pay a higher interest rate on the loan as punishment for late repayment.
Businesses are trying to ‘rob Peter to pay Paul’ in dealing with the capital shortage. Seafood processors pay farmers for fish after 20 days or one month. Businesses owe salaries to their workers. Meanwhile, strikes have occurred in two enterprises in Can Tho city.
VNN
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