Private SMEs tackled by inaccessibility to bank loans

by PV28 July 2017 Last updated at 18:10 PM

Customers borrow at a VPBank’s office in Khanh Hoa Province (Photo: VNA)
Customers borrow at a VPBank’s office in Khanh Hoa Province (Photo: VNA)

VTV.vn - Inaccessibility to bank loans is one of the main factors that has prevented private small and medium-sized enterprises (SMEs) from further development, experts said.

Private businesses have made significant developments in all fields, sectors and regions. According to 2016 data from the Statistics General Department, the private sector contributed 40 percent of the total GDP and generated 51 percent of jobs across the country.

Though the Government, the State Bank of Vietnam and local banks have made efforts and solutions to help private businesses access bank loans, there are still troubles for them to receive financial support.

“About 70 percent of private businesses cannot access bank loans, though there are many policies that allow local banks to increase their credit growth in the private sector,” said To Hoai Nam, Secretary General of the Vietnam Association of Small and Medium Enterprises at an online conference held on July 27 by the Government portal chinhphu.vn.

SMEs and private companies have to look for other available sources of capital, such as relatives and the black market, which offers high interest rates and risks, according to Nam.

Local banks are often cautious considering business plans of private companies and hardly change their policies to meet businesses’ requirements.

On the other hand, private companies are unable to demonstrate the potential outcomes in their borrowing proposals and comply with bank requirements about the standard form of financial reports, and they often have low-valuated guaranteed assets.

According to economist Nguyen Minh Phong, there are a few main reasons that have kept SMEs from obtaining bank loans.

First, private companies do not have long-term business strategies. Therefore, they prefer available financial loans to those from banks.

Secondly, bank lending rates are often higher than those of other capital sources, and the businesses themselves are not qualified to make loans from banks.

"Local banks need to change their ways of thinking and have more practical actions in making loans to SMEs," Nam said.

Local lenders should filter 10 percent of the privates companies – among the 70 percent of the private companies that have been unable to make bank loans – as potential businesses, he said.

Banks should also redesign lending terms to help private companies become able to access loans, he added. “It is important that banks make unsecured loans for SMEs and allow them to access the long- and middle-term loans.”

Phong said that private companies should merge with each other to raise their status on the market and make their brands more well-known so that they are able to receive loans from banks.

Private companies should also look for other sources of capital such as initial public offering (IPO) on the securities market, he said.

Local banks should improve their risk management mechanisms and lower their standards for guaranteed assets and unsecured loans for private companies, especially newly-established firms in the market, Phong said.


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