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Black market capital blocking small businesses
As the doors of commercial banks are shut tight these days and banks have become more selective in providing loans, small businesses have no other choice than borrowing at exorbitant high interest rates on the black market.
The deposit interest rates have been eased after Techcombank unexpectedly raised their interest rate to the record high of 17 percent per annum earlier this month and was then instructed by the Central Bank to slash the interest rate. However, the lending interests offered by banks to businesses remain sky high at 18-20 percent per annum.
However, even if they accept high interests, businesses would still find it difficult to access bank loans. Big banks now prefer lending money on the interbank market, which is safer and more disengaged than providing loans to businesses. Meanwhile, as for smaller banks? ensuring liquidity is the top priority, therefore, they are not trying to push up loaning.
Therefore, small businesses now have to seek capital on the black market. Nguyen Cong Hoa, Director of Dong Tam Construction Company, said currently, it is difficult for small enterprises and banks to reach a consensus. “We contacted three banks to ask for the loan of 300 million dong, but the banks all said they will only provide loans in early 2011,” he said. Therefore, Dong Tam has to seek capital on the black market. Hoa said that he had to pay the exorbitant high interest rate of 3.5 percent per month, or 42 percent per annum, which is double the bank interest rate.
“We know that with such high interest rate, we will not be able to make profit, or will even have to accept a loss, but we still have to borrow money, because we have to pay due debts and purchase materials to realize the already signed contracts, or we will face a fine for the delay,” he said
Nguyen Thanh Loan, Director of Anh Binh Company, the owner of four big fashion shops at Hom, Dong Xuan Markets and on Nga Tu So street, said that every day she receives the people who come to offer to lend money with the interest rate of 3-4 percent per month. Though the interest rates are very high, small merchants still have to accept loans, because they cannot borrow money from banks.
“We really need capital now. A Tet sale season can bring the profit which is equal to the profit we earn in the whole year. If we do not have capital right now, we will not earn any money,” Loan said
In craft villages, workshops’ owners also complain that they have to borrow money from different sources to realize the orders.
Nguyen Van Do, Director of Phu Do Company in Chuong My district in Hanoi, said that every month, the company exports five containers of handicraft products worth 3.5 billion dong. Do has a lot of orders, but he cannot arrange capital to fulfill the contracts.
Le Xuan Nghia, Deputy Chair of the National Finance Supervision Council, said that in developed economies, like the US, small businesses can be unconditionally guaranteed they would be able to borrow money from banks. Meanwhile, Vietnam still has no reasonable policies that help small enterprises access bank loans. Therefore, when commercial banks tighten credit, small businesses have no other choice than seeking black market’s capital.
vietnamnet, Dau tu
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