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Interest rates still too high for businesses
Many businesses still find borrowing at commercial banks too costly even though the State Bank of Vietnam is encouraging banks to lend
Nguyen Thi Lan, owner of a rice-mill in Phu Tan District in the southern province of An Giang, said she planned to borrow VND3 billion (US$143,884) to process rice to sell to rice exporters this season.
Yet, the banks she approached charged an interest rate of 1.8 percent per month, which means she would have to pay VND1.8 million in interest rate every day.
“With increasing gas and electricity prices, this is simply too much,” Lan said, adding she had to rethink her plan to borrow.
Le Van Tam, a fish breeder in Chau Phu District also in An Giang Province, is facing a similar situation.
After being turned down by several banks, he had to mortgage his rice field for a loan of VND300 million with an interest rate of 1.8% per month or 21.6 percent per year at Sacombank.
Tam calculated he would have to make at least VND32 million to pay for interest rate within 6 months in the context of increasing prices of fish seeds, fish food and gas.
“Suppose fish prices go down, then my profits won’t be able to cover interests,” Tam said.
Like all businesses these days, Tam and Lan still find borrowing too costly even though they work in fields that are eligible for preferential lending under a current policy by the state bank.
Le Trong Nghia, Director of the State Bank of Vietnam – An Giang Branch, said loan interest rates at 17 banks in his province indeed range from 17.5 percent to 21.36 percent per year.
To Hoang Tho Vinh, Director of Southern Nutritious Food Company, such interest rates were very high. “Most businesses want interest rates to be as low as possible,” Vinh said.
Nguyen Thai Hoc, Chairman of the Vietnam Cashew Association, agreed. He said current loan interest rates were too high for producers working in agriculture.
Hoc said compared to foreign producers, which enjoy cheaper loans, Vietnamese producers always have a disadvantage.
Having to worry about paying high interest rates on bank loans, local exporters often can’t wait for their products to fetch higher prices on the international market but simply sell them as soon as possible.
President of a bank based in Hanoi said loan interest rates were unlikely to go down. Since interest rates on savings went down to 14 percent per year, Vietnamese have opted to invest their idle money elsewhere.
That means banks would still have to charge businesses high interest rates. “Not until the end of the second quarter at least can loan interest rates go down,” he said.
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