The global economic crisis has pushed many Vietnamese enterprises, particularly small and medium-sized enterprises (SMEs) into challenges due to narrowed outlets. SMEs have made remarkable contributions to the national economy. The Vietnam Banking Times said SMEs contribute 30 per cent to the national annual GDP, own 32 per cent of the society’s total investment and create jobs for 90 per cent of the national labour force. Therefore, it’s necessary to provide timely financial support to SMEs.
According to the statistics of the Small and Medium-sized Enterprises Association, enterprises that have a registered capital of over VND10 billion account for 13 per cent of the total SMEs. Due to their small size, they are hard to gain access to bank loans as banks often require SMEs to have 10 per cent equity and make use of all their assets. In addition, many SMEs have big debts. According to the association, around half of the SMEs have outstanding loans. However, an enterprise that has outstanding loans does not mean that it is weak as that loan may be resulted from big inventories due to narrowed market and high interest rates, which hinder SMEs from borrowing bank loans for their production.
In addition, the most prominent point of SMEs in Vietnam is their simple and non-standardized accounting systems. SMEs are thirsty for human resource to carry out feasible projects; and even though some enterprises do not pay sufficient attention to manpower and few of them have applied advanced technology in production. All the problems have lowered banks’ trust in SMEs and posed more obstacles to them while gaining access to bank loans, particularly medium and long-term ones.
According to the statistics of the Ministry of Planning and Investment, only 32 per cent of SMEs can afford the bank loans, 35 per cent of them are encountering difficulties in gaining access to the loans and 33 per cent of them are unable to have access to the loans. According to a survey by the Vietnam Small and Medium-sized Enterprises Association, banks approve only 40 per cent of credit documents by SMEs. Larger companies are able to mobilize capital via different channels such as issuing shares and treasury bills but SMEs are hard to do so. Therefore, SMEs often borrow money via their relatives or unofficial channels of high-interest lending, which has resulted in a lot of disadvantages for them.
As mentioned above, SMEs have big outstanding loans but it does not mean that outstanding loans are bad debts. In order to prevent SMEs from facing difficulties in operations, banks should have a policy to restructure their debts, adjust debt deadlines or exempt fined interest rates due to late debt payment for SMEs that has healthy business operations but are affected by economic crisis. Eximbank has restructured its debts and adjusted terms of loans for enterprises, including SMEs. This policy has benefited 16 per cent of SMEs with VND4 trillion worth of outstanding loans on the bank’s total outstanding loans of VND25 trillion.
In addition, the bank system needs to give support to SMEs via interest rates and other suitable products and policies. One of the biggest difficulties faced by SMEs while applying for loans is their small size and modest assets. Due to the absence of a guarantee bank account, SMEs find hard to have access to bank loans or are unable to afford interest rates. Eximbank has launched a policy to support import-export activities, via which, SMEs benefit from soft loans while the bank has combined the subsidized loan policy for enterprises at 4 per cent.
Also, banks should provide financial support to SMEs via financial leasing. Instead of paying once for equipment and machines, banks can help SMEs hire assets via financial leasing contracts via banks’ subsidiary companies, or give financial support to leasing assets via other leasing companies. The best benefit of the financial leasing is to avoid capital stagnation in assets but help enterprises timely modernize and improve their production capacity via hiring equipment and machines and applying advanced technology. Particularly, SMEs are not obliged to give assets as a guarantee but they have taken advantages of business opportunities to produce and distribute products and services with better quality and designs to the market.
Last but not least, commercial banks should intensify their capacity to give loans to SMEs. At present, many SMEs in Vietnam have simple and non-standardized accounting systems that are unable to build a good project to borrow money. Therefore, banks should launch programmes to help them see their shortcomings and select suitable bank services for themselves, particularly non-finance services. Therefore, banks can provide support to SMEs to make plan via consultancy, information support, market development and trade fair organisation as well as help them borrow money and do business smoothly. Banks should also draw out a mechanism to keep track on the entire operation process of enterprises so as to help them deal with arising issues.
In order to help Vietnam’s economy stop its decline, banks need to work out specific policies to support SMEs to gain access to soft loans in a bid to maintain and boost their business operations, which will help them make full use of their inner forces as well as help improve national potential.
Tieu Thuong
Vietnamese
