MSMEs Have More Opportunities to Borrow Money

11:54:12 AM | 3/9/2020

In the face of the economic effects of the Covid-19 pandemic, Vietnamese banks have launched many products to help micro-, small and medium-sized enterprises (MSMEs) have more feasible financing options for restructuring their production and safe business from now to the end of 2020.

Capital is needed to reach customers in the digital age

By the end of 2019, small and medium-sized enterprises (SMEs) account for about 97% of Vietnamese businesses. Despite accounting for a high proportion and playing an important role, this business sector always faces many challenges. The general picture of SMEs through the Provincial Competitiveness Index (PCI) in 2019 shows that the biggest difficulties for businesses were: capital (62%), sources of customers (60%), factories (55%), legal issues (45%).

Around the world, according to a survey by data provider Statista, 79% of SMEs believe that their most difficult challenge is to attract new customers. This is an issue that many businesses have struggled with, except for the "big players". Bigger companies with a resounding history often easily attract new customers.

To make up for its fledgling reputation, SMEs need technology and a large amount of capital to reach customers in the digital age. However, that is quite difficult to do even though lending is now much more accessible than in previous years. Many small and medium enterprises are rejected by banks for a variety of reasons, such as non-transparent book systems and financial statements of enterprises. Or the leaders of SMEs have the trend of borrowing massively to invest in fixed assets temporarily without thinking about whether they can get it back with revenue. After a while, the capital and inventory are stagnant, then it will be too late to think how to get payback.

Outdated capital and technical conditions affect strategy and business performance. To expand business development is also difficult when "the difficulty bundles the wisdom", lack of capital leading to the loss of profit.

Lacking investment capital, most SMEs have to operate "modestly" in cramped offices and in "poor" facilities. All of these are "killers" that silently kill the work motivation and creative spirit of corporate personnel and create a vicious cycle of difficulties piling up.

Many support loans

Every year, the State has a package to support small and medium enterprises such as the annual credit incentive program named "SME Success" or most recently, a credit package connecting the bank and enterprise with a total capital of VND274,450 billion in the last six months of the year. However, very few SMEs are able to access capital. During the recurring Covid-19 pandemic in Vietnam, it is even more difficult for SMEs to have no reserve capital to maintain their operations. They can only wait for banks to implement their own specific support packages.

However, not all businesses can access the bank's capital, because many enterprises do not meet the loan conditions, the approval process is slow, they lack documents, or have wrong documents or unsecured procedures. Especially, during the Covid-19 pandemic, although banks want to support, businesses must also ensure the safety and efficiency of capital flows. If this cannot be guaranteed, even though banks want to provide capital, it is very difficult to support them.

Another obstacle in getting loans is that the interest rates at some banks are quite high, making small businesses still hesitate to approach. Those reasons can unintentionally cause enterprises to lose investment opportunities.

It can be said that the lender and the borrower need to have a good coordination with each other. In order to be facilitated by banks in terms of capital, the businesses also need to coordinate with banks in the implementation of loan documents such as: Completing dossiers; meeting deadlines for sending records, and; having a development plan.

If they meet all the above requirements, borrowing will not be difficult. Up to now, many banks have launched incentive programs to support SMEs during the pandemic.

In particular, at An Binh Commercial Joint Stock Bank (ABBank), "Quickly Refinancing - Business Growth" program, which supports SMEs to re-start and boost their business after a difficult period due to Covid-19, will be applied with the preferential lending interest rate of only from 6.5% / year. Or a duo of credit products for the group of micro enterprise customers of ABBank have more flexible and improved policies to help micro enterprises more easily access capital. Both product packages are designed for a credit extension of up to VND10 billion, loans ratio up to 99% of the collateral value and a maximum credit term of 120 months.

Not only ABBank, many State-owned and joint stock banks have launched programs and solution packages to support small and micro enterprises. Vietnam Maritime Commercial Join Stock Bank (MSB) has launched a super-fast credit package for businesses with a limit of up to VND10 billion; Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) has an incentive program “VietinBank SME Stronger”; Sai Gon Joint Stock Commercial Bank (SCB) implements an incentive program to support businesses; Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) spends VND1 trillion supporting enterprises to recover and develop business after the Covid-19 pandemic.

The current loan packages not only help micro enterprises easily access capital for business operations in the second half of 2020, but also are the right solutions for micro enterprises through a commitment for simple loan procedures, minimal invoices and competitive lending rates.

By Quynh Anh, Vietnam Business Forum