Helping Enterprises Better Access Loans

Currently, concerning the health of enterprises, especially SMEs, there are various figures. While the Ministry of Planning and Investment (MPI) through the General Statistics Office (GSO) gave information that the number of dissolved enterprises is 42,000, according to the Vietnam Chamber of Commerce and Industry (VCCI), this number must be 100,000. There are also different figures from different sector associations, including SME association. Of course there are various methods of collecting data. Recently, data on the number of dissolved enterprises has been revealed to be inaccurate. It cannot end at 42,000 enterprises, if counted from earlier till now, the figure must be higher. In my opinion, the data of VCCI with 100,000 enterprises, accounting for 20 percent of total number of enterprises is most accurate. Based on the monetary supply, product inventory, capacity of access to banks’ loan, situation of narrowed business has become more serious. The number of enterprises in fact does not increase, just goes around several figures. Therefore, without reliable, accurate data, there is no need to conclude in rush. An accurate assessment requires clear criteria, there must be assessment survey, typical investigation, as well as condition evaluation of each field. It requires also contribution and smooth coordination of sector associations, mainly responsible agencies.

 

Reviving the enterprise community depends on a variety of solutions based on their existing problems. Currently, enterprises, especially SMEs, have to cut down their production scale, or even stand on the edge of bankruptcy, bad loans are increasing. It can be explained by 03 reasons:

 

First, products of enterprises are not smoothly consumed because of declining demand, rising costs, and shrunken domestic and world markets. Enterprises sell slowly and stagnantly. Moreover, due to loose import management, the number of untaxed goods and goods competing unfairly is high, so consumption of domestic goods drops further. Those are reasons why goods cannot be sold; consequently enterprises have no money to pay off debt, taxes and salaries for employees, as well as to reproduce. As a result, they are not qualified to get more loans from banks; their difficulties therefore increase.

 

The second reason is bad loans, as a result of not making sales, poor management and not tightly controlling lending, as well as because of freezing of real estates, securities and consumer goods. Easy loans cause easy using, which causes bad loans. When having bad loans, enterprises are unable to get more money from banks, profits hence decline, the number of employees reduces. As for banks, when bad loans increase, they will not grant loans more, because the increasing bad loans threaten their security. The continuity of rising loans means having more bad loans, exchanging high profits for lower ones, or exchanging profits for losses, threatening the security of banking system, of every bank. Bad loans push banks and enterprises into an immobile condition, banks cannot grant loans while enterprises need money but cannot borrow because the more they borrow, the more they get losses.

 

Third, among bad loans and inventories, real estate has the biggest problem. The proportion of loans for real estate against total loans is up to 30 percent. Bad loans from real estate account for 70 percent of total bad loans. Capital, bad loans are lying on real estate. Real estate market is frozen, houses cannot be sold, banks cannot recover their money, and enterprises invest without returns. Besides, procedures also cause problems for enterprises, banks are afraid of breaking laws and are unable to lend against their willingness.

 

In fact, a Credit Guarantee Fund was established before inventories swelled. Several provinces have launched it, but because of too little capital, it is non-functional. Therefore, guarantee has no meaning. Standing before the challenge, the Government has directed a restructuring, assigned to Vietnam’s Development Bank to create specific regulations and processes. Credit guarantee has recently created several thousands of billion and some enterprises are also guaranteed. However, there are some amenable terms that are not accepted by banks and they still have to check and verify again. As a result, the programme till now is not bad, however some problems must be noted aiming to improve the efficiency. Specifically, the double of fees from Vietnam’s Development Bank and commercial bank cause.

 

In my opinion, to solve this problem, we should have comprehensive and appropriate solutions. Specifically, regulations and criteria for guarantees must be made clear. Next, after guaranteeing, there must be a responsibility division between State-owned banks and commercial banks to avoid double guaranteeing. Therefore, development bank and commercial bank should discuss about reasonable division of costs and responsibilities.

 

We should also agree that in the context of the current gloomy economy, helping enterprises access loans is necessary for them. However, we should elaborate strategies to upgrade enterprises and banks. Enterprises apply for being guaranteed, not for paying off for their losses. Once guaranteeing, development banks must take responsibilities, and commercial banks give loans. Therefore, all three parties must operate comprehensively, creating flows and abilities to produce, guarantee and give loans.