Banks Join Hands to Help Businesses in the Difficult Time

During the first six months of 2012, the banking industry in Soc Trang province aims to fulfil the socioeconomic targets of the province, as well as the specific targets of the industry. The number is much better compared to late 2011. More specifically, deposits reached VND10,378 billion during the first six months, and outstanding loans were VND16,331 billion, with VND460.6 billion of bad debt.

 

The credit network in the province consists of 18 credit agencies, 80 transaction points, in essence satisfying the demand for credit and banking services of different economic sectors. However, in the near future, the banking industry will expand to open even more branches with sufficient financial capacity and excellent banking services.

 

In order to help businesses overcome difficulty, the Soc Trang Branch of the State Bank of Vietnam (SBV) has issued guidelines instructing credit agencies to facilitate deposit activities to allow businesses, especially labour-intensive ones, to access capital more easily to stabilise their operations. This is mainly aimed towards small and medium enterprises (SME). Interest rates should be reduced, and loan maturity and loan extension should be reconsidered.

 

Regarding the reasons businesses are having difficulty in accessing capital, Mr Vuong Quoc Nam, Director of the Soc Trang Branch of SBV, said that this is a common occurrence in Soc Trang and that though there are some complaints from businesses, it is not that difficult for businesses to access capital.

 

He also revealed that specific reports by local commercial banks have shown that more than 80 percent of businesses in the province are able to access bank capital. Currently, businesses satisfying the loan requirements and operating efficiently still enjoy a 11-13 percent per year interest rate. Businesses lodging complaints are the ones which either do not satisfy the loan requirements, have enrolled in previous loan contracts with high interest rates, or have outstanding debts which have not been repaid. 

 

Also according to the Director of the Soc Trang Branch of SBV, in order to access the capital, businesses should employ efficient production and sale strategies, secure loan contracts and the businesses themselves must satisfy the loan requirements. If all of these conditions are met, businesses can borrow capital to expand their operations.

In order to help businesses in this difficult period, Mr Nam believes that there should be multiple measures in place, of which interest is only a part. Banks can restructure loans and reduce interest rates, but businesses themselves must employ measures to overcome their own challenges. They should focus on freeing up their inventories, restructuring their operations and putting good managers in place, because many businesses do not have much cash on hand but rely on borrowed capital to sustain their operations. At the same time, the Government should also reconsider the tax system as well as the regulatory framework. SBV has already done its part by reducing the interest rate, which helps lessens the burden on businesses and people.

 

Mr Nam also revealed that in the near future, the banking industry in Soc Trang will prioritize loan contracts to help boost production, especially for agricultural and rural development, exporting, supporting industries and SMEs.