Interest rates no longer decisive for businesses

by P.V03 May 2016 Last updated at 16:35 PM

VTV.vn - Although interest rates have reduced by more than 50% in recent years, many companies still express concerns over exchange rate volatility.

Since the beginning of the year, deposit rates at some commercial banks have raised. However, a lack of capital and high interest rates aren’t the main concerns of businesses at the moment.

The Cat Que Company specialises in exporting coffee and agricultural products. They currently pay interest of 4.5% a year. For export businesses such as Cat Que, interest rates are no longer a problem, they’re more worried about finding export markets.

"We borrowed nearly 27 million USD loan from Vietnam Bank for Agriculture and Rural Development at 4.5% a year. This isn’t an unreasonable rate. Consumers are the ones that will be most affected by high interest rate since we’d just increase prices if rates increased. However, interest rates aren’t our priority at the moment. The main problem is finding markets", said Pham Thang - Director of Cat Que Company in Hanoi.

Interest rates have marginally increased since the start of the year. However, most lending rates remain stable. Banks have eased loan approval procedures for businesses, but bank are concerned, as they believe many businesses aren’t particularly strong clients.

"We’ve simplified business loan procedures. Our loan interest rates have actually remained unchanged since last year. Banks are happy to offer loans to good businesses, but we’re also aware of business competitiveness issues", said Nguyen Thi Phuong - Deputy General Director of Vietnam Bank for Agriculture and Rural Development.

The big question is whether businesses have sufficient capacity to effectively utilise the loans. The second problem is whether the interest rates are likely to fall this year.

"In my opinion, there are few chances that the interest rates will decrease. This only happens if we control inflation, and resolve bad debts. For the past few years, credit growth has been maintained. So if we are able to handle bad debts, there is a better chance that we can lower the interest rates", said Truong Van Phuoc - Deputy Chairman of Vietnam National Financial Supervisory Commission.

The question still remains whether businesses will truly develop if they have better access to loans or whether easy credit will mask competitiveness issues? Lower interest rates and improved economic performance would be an ideal scenario for Vietnam’s business community.

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