|
Ironing out business snags for SMEs
Small and medium-sized enterprises (SMEs) make up 90 percent of the total of nearly 300,000 businesses across the country. However, they are facing a lot of difficulties, including capital shortages.
According to Duong Thu Huong, General Secretary of the Vietnam Banking Association, even though lending interest rates fell to 17-20 percent, businesses, especially SMEs, find it difficult to get access to bank loans. Many SMEs complain that the current interest rates are even higher than the ratio of profit they can earn from production and business activities.
Given the high inflation, commercial banks have recently tightened lending conditions, which are only met by bigger, more regular clients. Therefore, new businesses find it hard to get access to bank loans due to high risks.
Despite difficulties, several SMEs do not want to borrow bank loans.
“It is true. Once they do not make profit, they will not take out loans,” says Cao Si Kiem, President of the Vietnam SME Association. “However, banks should refuse proposals by businesses if they are found in a critical situation.”
However, Mr Kiem affirms that without immediate access to bank loans, at least 20 percent of SMEs will face the threat of bankruptcy.
“Currently, 10 percent of these businesses have stopped operation, and they will go bankrupt unless they restructure their business. The remaining 10 percent are being affected by high inflation, but the situation will change for the better if proper policies are introduced,” says Mr Kiem.
SMEs make up 45-50 percent of the labour force, produce over 40 percent of consumer goods and generate over 30 percent of the State budget.
To survive, Mr Kiem says SMEs have no choice but to increase their equity and lower production costs. In addition, the lending interest rate must be lowered to 15 percent – a level that businesses think they will make profit.
He explains that whether or not businesses stand firm depends on the inflation rate, not the interest rate. The most important question is by what percent inflation will fall to support businesses.
“Businesses, bankers and securities companies should join hands to combat inflation to lower the consumer price index (CPI). The interest rate will be then adjusted to help businesses get easier access to bank loans,” says Mr Kiem.
Meanwhile, Do Tat Ngoc, chief executive officer of the Bank for Agriculture and Rural Development, says the Government’s anti-inflationary goal will be affected if banks lower their lending interest rates by reducing the basic interest rate which is currently lower than the CPI.
“Commercial banks cannot cut their interest rates constantly because they have to ensure minimum input/output margins and set up venture funds,” explains the CEO.
According to Ms Huong, general secretary of the Vietnam Banking Association, the Government should quickly restructure its credit guarantee fund network next year to support businesses in accessing bank loans and increase the operational safety of credit organisations.
To regulate banking services in line with the market economy in the long-term, she proposes revising articles 474 and 476 of the Civil Code, which specify that the lending interest rate must not be more than 1.5 times higher than the basic interest rate.
“A fixed ceiling interest rate does not conform to the norm of the market economy,” says Ms Huong.
The State Bank of Vietnam has announced that it will consider lowering the basic interest rate if the CPI rises by less than 0.8 percent in October. It will also consider reducing the ratio of compulsory deposits and purchasing compulsory shares for commercial banks in an effort to improve the liquidity of banking operations.
VOV
|
