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SMEs dying of thirst…for capital: expert
The tightened monetary policies have been leaving small- and medium-size enterprises (SMEs) seriously short of capital, and on the verge of bankruptcy. Cao Sy Kiem, former Governor of the State Bank of Vietnam, now Chairman of the Small- and Medium-size Enterprises’ Association, has warned about the wide-scale bankruptcy of businesses in the post-inflation period.
Businesses are complaining that they are lacking capital to maintain production and business. Could you please tell us about the seriousness of the capital deficiency and the development of ‘black credit’?
The tightened monetary policies mean less lending capital and higher lending interest rates. The credit growth rate was 56% last year, and it is expected to fall to 30% this year, while interest rates have risen from 11% to 20%. As a result, businesses have been falling into a serious shortage of capital. A lot of businesses cannot access bank loans, while those which can borrow money from banks cannot use the loans effectively due to the overly high interest rates.
As banks have closed their doors to businesses, SMEs have to seek unofficial lending sources, which provide loans at high interest rates, in order to maintain production.
Could you please give more details about cases in which businesses have to access unofficial sources, which we call ‘black credit’?
We have not conducted any official survey and made any official report about black credit yet. However, our members have reported that they now have to borrow money from unofficial channels at exorbitant interest rates. Some enterprises have asked me to help them find sources from which they can borrow money, even at high lending interest rates.
It would be very dangerous if businesses continued to lack capital for a long time. A massive collapse of enterprises would threaten the national economy.
What are the biggest difficulties for SMEs now?
There are three big difficulties. First, they cannot access bank loans. Second, the lending interest rates prove to be overly high and unaffordable for them. Third, input material prices have been increasing dramatically, which has pushed production costs up.
What would you suggest businesses and the government to do in order to help SMEs to overcome the difficulties?
SMEs have to manage to rescue themselves and overcome the difficult period. They need to take necessary measures to cut down expenses or seek new business. Meanwhile, the state should take suitable measures to support SMEs by giving tax incentives, applying suitable credit policies, helping businesses cut expenses by improving the business environment.
Banks need to have suitable treatment policies for businesses. They need to be ‘open-handed’ in funding projects which have high feasibility and play important roles in the development of industries, while they need to say ‘no’ to unfeasible and unnecessary projects.
Banks have announced programmes on supporting SMEs, while they are considering cutting lending interest rates. What would you say about this?
The moves have been welcomed by the business community. But we need more.
VNN
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