Helping Businesses Access Necessary Capital

According to the Dong Nai Branch of SBV, in the first six months of 2012, the credit growth rate of the entire banking system in the province is 5.5 percent, much lower than the target rate, but higher than the national average.

 

Deposits during the last six months increase by 11.66 percent compared to the same period last year and are rated below average. Although the VND deposit rate has seen a major cut down by SBV, four times from March to April, reducing the deposit rate ceiling from 14 percent to 9 percent; credit agencies are still able to attract more capital and deposit growth rate still increases but not by as much as that during the same period last year.

 

Since the beginning of the year, the liquidity in the banking system has been improved. The USD to VND exchange rate of banks and the market is quite stable and close to the interbank's average exchange rate. Therefore, instead of holding on to dollars with a bullish expectation, many people and businesses have sold US$ to banks, resulting in a faster deposit capital growth rate in terms of VND compared to that in terms of foreign currencies.

 

While the credit growth at the national level stays still compared to the beginning of this year, Dong Nai still maintains a credit growth rate close to 50 percent of the deposit growth rate (4.43 percent while the deposit growth rate increases by 11.66 percent compared to the beginning of the year) and equivalent to 30 percent that of the same period last year. For several years Dong Nai has had a debt to deposit ratio of 95-98 percent; but due to unfavourable economic environment, this ratio is only 88 percent. Outstanding loans during the first six months of 2012 reach VND60,629 billion, up 4.43 percent compared to the beginning of the year.

 

Mr Tran Quoc Tuan, Director of the SBV Dong Nai, explained that there are many reasons for the recent low credit growth rate. The ability of businesses to absorb capital is weak, both in terms of investment and consumption. Some manufacturers encounter problems such as high inventory; businesses do not expand, and some even shrink, their operating scale; thus the low demand for capital. Though banks have brought down the lending rate, customers do not qualify as borrowers; bad debts surge so the number of customers enjoying lower interest rate is limited.

 

During the first five months of 2012, outstanding loans to develop the agricultural sectors and rural areas according to Decree 41 are VND9,987 billion, up 6.21 percent compared to the beginning of the year, representing 16.59 percent of total outstanding loans in the province. Outstanding loans for industrial production and non-agricultural commerce and services are VND2,965 billion, representing 29.79 percent of the total outstanding loans for agriculture and rural development.

 

The bad debt ratio in the banking system in Dong Nai is currently 3.11 percent, lower than the national average.

According Tran Quoc Tuan, the goal for the last six months of Dong Nai banking industry is to cut costs to reduce the lending rate, which enables businesses and people to access bank loans with acceptable interest rates in order to expand and develop efficient businesses.

 

At the same time, banks should timely satisfy demand for capital of efficient projects and business plans, those which are in line with the ability to attract capital and assigned credit growth target; prioritise credit for agriculture and rural development, producing exported products, supporting industry, and small and medium enterprises which employ people and efficient projects; control the foreign credit growth in accordance with the ability to attract capital and the policy to reduce the amount of USD in circulation.

 

Also according to Mr Tuan, in order to help businesses amidst this difficult time, the Dong Nai banking industry is restructuring the maturity date with loans not being paid on time due to national and international factors causing a difficult business environment, slow turnover rate in terms of consumption and exportation, and high inventory. The industry is also making an effort to cooperate with customers to resolve issues in repaying the debts and accessing capital in order for the customers to recover, maintain and expand their businesses, in the process gaining the ability to repay the debts and reducing bad debts; continuing to initiate new loans for efficient projects with the ability to repay these loans.

 

Apart from the above mentioned common goals, in the future, the banking industry in Dong Nai should prioritise loan capital for small and medium enterprises, agricultural and rural development, and exporting and supporting industries.