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Businesses prefer US$ loans due to stable exchange rate
Unlike previously, when businesses preferred borrowing money in VND for fear of VND/US$ exchange rate fluctuations, they now prefer US$ loans due to the lower interest rates.
The demand of export companies for loans in foreign currencies is increasing, simply because US$ loan interest rates are lower than VND loan rates.
The demand of export companies for loans in foreign currencies is increasing, simply because US$ loan interest rates are lower than VND loan rates. Meanwhile, banks like to provide US$ loans for export companies because they have high capability of debt payment with the income from export contracts.
According to Nguyen Tuan Anh, Deputy General Director of Ut Xi Seafood Processing Company, banks are now lending VND at the interest rate of 1.7-1.75% per month, while lending US$ at the rate of 8-9% per annum.
However, not all export companies have been able to access foreign currency loans since the State Bank released Decision No 09 on April 10, 2008 on narrowing the list of subjects eligible for US$ loans.
Truong Dinh Hoe, Secretary General of the Vietnam Association of Seafood Exporters and Producers (VASEP), said that VASEP has not got any response from the central bank to its proposal to expand the lists of subjects able to take out foreign currency loans.
Several banks have launched programmes on lending $US at the interest rates of VND loans. Eximbank has set aside VND2tril for the programme, while ACB has $20mil reserved to lend to export companies.
Businesses well know that there latent risks with US$ loans, but they still think that this is the best choice for now. Tran Van Pham, Director of Soc Trang Seafood Import Export Company, said that he still likes borrowing in dollars because of the overly high rates of VND loans.
Meanwhile, banks, which have been criticised for setting overly high lending interest rates, said that they cannot slash lending interest rates right now because deposit interest rates are relatively high, at 16.5-17% per annum.
Luu Duc Khanh, General Director of ABBank, confirmed that the bank likes loaning to export companies, as it proves to be safer than other kinds of credit in the current conditions. Meanwhile, the demand is very big from enterprises which need foreign currencies to import materials for local production.
Khanh also said that US$ loans have become less risky as the VND/US$ exchange has become stable with profuse supplies of dollars.
VNN
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