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Black credit still existing ‘cause market not transparent enough
Black credit is considered illegal in Vietnam. However, it still has exists for the last many years, simply because the demand is always very high.
A well known businessman asked a friend to help him borrow hundreds of millions of dong which he will use to collect materials for the year-end production season. “Why don’t you contact commercial banks? You have mortgaged assets, and you will get a loan,” the friend replied.
The businessman smiled, said that he knows well that if he contacts banks, he would be able to borrow the money he needs. However, the bank would disburse the money only after one month.
“The situation would be quite different after one month, and my opportunities would be missed,” the businessman said.
After making several calls, the businessman found a lender who accepted to lend 700 million dong at “reasonable” interest rates.
The businessman, like many other Vietnamese businessmen and small merchants, prefer borrowing money on the black credit market, to seeking loans from commercial banks, even though the interest rates on the market are always exorbitant.
In principle, commercial banks are the right addresses for businesses to contact when they need working capital. However, it is never easy to borrow money from banks, as credit officers always cite hundreds of regulations stipulated in the laws, government decrees and circulars that involved parties have to follow. In order to obey the regulations, borrowers have to follow complicated procedures and show a lot of necessary documents.
Therefore, borrowers can only get money tens of days or one month after they contact banks. Meanwhile, in doing business, tardiness always means missing opportunities and losing money.
If borrowing money from the black credit market, borrowers can easily get money after several hours.
This explains why black credit market has existed for the last many years despite the great efforts by the local authorities to eliminate them.
Of course, when businessmen want to borrow money from the black credit market, they have to accept high interest rates. Here, in the market, the rule “high risk, high interest rate” also exists. This means that when lenders accept to lend money without requiring complicated procedures, they need to set up high interest rates in order to cover risks. In general, the interest rates applied on the black credit market are always 3-4 times higher, or sometimes 7-8 times higher than the official interest rates.
Explaining the existence of the black credit, Dr Nguyen Van Nam, former Member of the Prime Minister’s Research Team, said that credit institutions’ operation has been leaving “too much space” which is the “fertile land” for the black credit to develop.
The above said businessman said that black man is the “fellow-passenger” of small merchants, who have to pay high interest rates, but can get money soon to serve their business deals.
Especially, when borrowing money on the black credit market, no borrowers have to pay the “under table fee”. Meanwhile, if borrowing money from banks, borrowers usually have to pay additional fees to bank credit officers, which makes the actual lending interest rates higher than the quoted rates.
The black credit also proves to be a helpful method to those, who want to get rich quickly. A businessman said that he has become a billionaire because he has used the capital left by the late mother in the “most reasonable way”. He has lent the money and made the capital multiply.
However, like any other “black” things, black credit is really risky to both lenders and borrowers. In case of dispute, they are not protected by the laws.
Dr Nam believes that the black market still exists, because the economy is “not white”, i.e. it still lacks the transparency. Therefore, the only way to control black credit is to perfect the legal framework and make the national economy transparent.
Phan The Hai
vietnamnet
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