The government’s decision to grant 4 per cent of interest rate support for enterprises is an effective leverage for both banks (clearing capital and widening credits) and businesses (continuing production, cutting production costs and creating employment). However, it is not really easy to borrow money and it seems to be harder to take back the credit.
Hard access to credits
According to the State Bank of Vietnam (SBV), the VND17 trillion (about US$1 billion) used for interest rate subsidy, enterprises can borrow up to VND420 trillion (US$24.7 billion). The interest rate support of the government purposed to facilitate businesses to access soft loans (low interest) to expand production and business operations.
According to a report released by the State Bank, 85 commercial banks have granted VND144,311 billion of soft loans since the start of February. Particularly, state-owned commercial banks and the Central People’s Credit Fund have disbursed VND114,537 billion, commercial joint stock banks VND26,837 billion and foreign-led banks and VND2,938 billion.
However, this disbursement pace may not be quick enough as the cash at banks remains large. The SBV - HCM City Branch said the city-based lenders only lent VND10,300 billion after a month of applying the interest support lending programme. This figure is considered quite small because they registered to loan VND60,000 billion in the first quarter. Mr. Ho Huu Hanh, Director of SBV - HCM City Branch, said this was attributable to the low demand from exporters which did not have enough orders for more loans. “Banks have much of ready cash but needing borrowers do not have commercial orders, lack mortgaged assets or failed to meet lending requirements,” Mr. Hanh added.
Personal consumer credit - not easy
After several months closing the door to consumer credit, many banks eased up the requirement for house purchase loan which may reach VND1 billion. They agree to lend up to 70 per cent of the house value. However, it is not easy to access the credit loan.
The interest rate of consumer lending is 12 per cent plus, even nearly 14 per cent at some banks, much higher the ceiling interest rate of 10.5 per cent per annum set by the State Bank of Vietnam. General director of a bank said: “The State Bank has allowed commercial banks to lend at negotiable interest rate and house purchasing lending is at high risk; thus, banks must apply high rate.”
In addition to high interest rate, the lending condition is quite hard. Borrowers have to mortgage their assets and have incomes of over VND10 million per month while banks value mortgages at 40-60 per cent of real value.
Lenders are racing to attract borrowers by offering higher credit levels. But, to get VND500 million to VND1 billion of consumer credit at Lien Viet Bank or SeABank, borrowers must prove their incomes at VND25 million upwards. This is a demanding criterion.
According to Mr. Tran Phuong Binh, General Director of SeABank, said: Opening is different from easiness. If customers have bad debts, instable work and only one source of income, his bank will review carefully and even turn down.
More lending - mutual benefits
To clear the rumour that commercial banks are beneficiaries of the interest support policy, State Bank Governor Nguyen Van Giau affirmed that businesses are benefiting from the soft loan policy, not banks.
The governor said commercial banks are lending at 10 per cent per annum. If a benefiting enterprise borrows, under the Decision 131, it only needs to pay an interest rate of 6 per cent and the remaining 4 per cent will be supported by the government. Clearly, enterprises enjoy lower financial costs to cut production costs and prices - a move to boost business and production.
However, lending is a two-blade knife, according to experts, because bad debts may increase. When incomes are decreasing, short-term loans are stimulant but if the economy does not recover as expected, borrowers will become insolvent.
Lan Anh
Vietnamese
