Borrowers Need to Focus on Financial Information Transparency to Better Access Bank Loans

Giving remarks on the current status of small and medium enterprise (SME) system, Dr Cao Sy Kiem, Chairman of Vietnam SMEs Association, said SMEs currently account for 95 - 97 percent of total enterprises active in the country. However, up to 90-95 percent of companies have to rely on bank loans to continue operations. Unfortunately, given growing bad debts and overdue debts, they are unlikely to be able to access new loans. He said the biggest obstacle to SMEs’ access to bank loans rests in borrowing conditions.

 

To unfreeze funds for SMEs, Kiem recommended banks to classify borrowers, clarify objective and subjective issues to determine credit relations in order to provide good loans for right borrowers. Even when customers are in trouble, banks can still lend if they prove good business development projects. For their part, businesses must self-assess and review their production and business processes, identify strengths, weaknesses and shortcomings to draw lessons for their new business strategies and effectively utilise governmental policies and measures. At the same time, they must make an effort to meet borrowing standards and criteria specified by banks, based on market principles.

 

Sharing Kiem’s standpoint, Dr Le Tham Duong, Dean of Business Administration Faculty under the Ho Chi Minh City Banking University, said, to effectively access credit sources, the key issue is that businesses need to make banks come to them to offer loans rather than go to banks and queue for approval as now. This requires businesses to prove their strength, health and progress by formulating good business strategies, connecting input and output markets more stably, and avoiding reliance on a single market or a single product. At the same time, they have to focus on improving overall corporate governance, especially financial management, to accurately analyse costs and profits.

 

Pham Quoc Thanh, Deputy General Director of HDBank in charge of corporate customers, said, in another aspect, information transparency, especially financial information, is the best way for enterprises to score points and increase the confidence of lenders. When in trouble, instead of trying to conceal problems, they should actively share with banks, discuss and propose solutions to deal with their difficulties effectively, especially in debt rescheduling and restructuring.

 

Nguyen Hoang Minh, Deputy Director of the State Bank of Vietnam (SBV) - HCM City Branch, said that widening credit for SMEs faces a lot of difficulties because they fail to meet requirements for loans imposed by the law and credit institutions. The increase in bad debts also forced banks to be more cautious with new loans in general and credits for SMEs in particular.

 

He added that loans for SMEs are never scarce. To facilitate borrowers to boost production and business activities, banks have launched many capital support programmes for enterprises, but the latter fail to meet basic requirements for new loans. Therefore, to have wider access to bank credits, businesses must provide clear and transparent financial and company information. While picking up effective business plans and focusing on key business fields to create sustainable cash flows, they also must actively perform financial restructuring and corporate restructuring to eradicate unnecessary investment and business projects to consolidate financial and administrative resources for core business operations, as well as maintain balanced and healthy fiscal structure and closely manage cash flows.