Easier Access to Trust Loans

5:32:35 PM | 9/2/2014

To promote the growth rate and support for economic development, the State Bank of Vietnam (SBV) is opening up the door to help commercial banks to kick off their service packages based on their capacity. The new policies of the SBV are expected to encourage the banking system to improve the control process and promote the trust loan to set clearer directions.
Who is qualified for mortgage?
The banking system has remained stable. Weak banks have been restructured completely and the liquidity of the system is high. The mobilised capital remained steady while the bad debts due to the credit delays still have not been handled and the real estate market has not been recovered solidly. In the first 7 months of the year, the credit just rose 3.68 percent while from now to the end of the year, the credit is targeted to grow 12-14 percent to support economy recovery. The problem of the commercial banks at this time is how the capital is lent but this does not lower the standard of lending.
The continued economic difficulties, many businesses that are suspended or stopped for the opportunities so this is not the time for a new business plan. This leads to limited borrowing needs. Regularly, the banks used to get mortgages by red book house. But now, they will consider other factors like prestige and the borrower's repayment ability. It's not an easy transition step.
The policy of the SBV also encourages the banks to develop the trust loans under the Circular 5342/NHNN-TTGSNH that requires the credit institutions to develop a number of measures to boost lending, of which the lending without mortgage are considered for strengthening.
The SBV requires the credit institutions to build up the process to gather and exploit information based on credit rating, activities of the clients from the official service organizations combined with the system of internal credit ratings in order to improve the effectiveness of the appraisal and evaluation of the level of credit of the borrowers, that helps enhance the possibility for unsecured loan and simplify the procedures of lending.
This formulation of the SBV has gained the trust of the banks to open up door to the trust loans. This also shows the determination and efforts to accelerate the credit in the context that the credit growth was quite slow in the recent time.
Story of transparency
In the currently stagnant economic context, the SBV is hard to boost the credit growth. The credit congestion will slow down the recovery of the economy. The bad debts are challenging the banks and have not been solved yet, which forces the banks to set a backup fund to be against the big risks. The companies also can't solve the bad debts to reach the new capital investments for their production projects. This circle is not only the responsibility of the banking system. Therefore, the trust loans this time might be a good direction.
The collateral is a problem that many businesses and individuals have blamed for years. Not many of companies could prove their mortgage for the banking loans. The deposit through commodities and raw materials are also obstacles, which affect the rotation of production and business operation and particularly, cause the risk of loses and legal incidents that occurred last time. The collateral is an obstacle impeding the flow of credits and minimizing the group of lenders of the commercial banks.
Adversity is the mother of wisdom. The credit bottlenecks at the present have encouraged the banks to approve the unsecured to promote the growth, expand the opportunities for loans for people and businesses. The SBV has turned on the green light for the commercial banks; however, this puts pressures on how the commercial banks could do to take advantages of this action.
In fact, the banks long accepted the trust loans. Through the center of monitoring, reviewing and rating the customers, the SBV could set a layout for the customers to share information effectively. Pursuant the Document 5342, the SBV has proposed a plan to collect, process, and exploit the information regarding reviewing of the credit and activities of the clients from other official organizations combined with the system of internal credit ratings of the credit institutions, and foreign banking branches to improve the effectiveness of the appraisal and evaluation of the credit of the borrowers.
A leader of the large-scale commercial bank said that at present, at many banks, the borrowers could make a loan without collateral.  A mechanism of supervisory and management of cash flow has been built to ensure security.
Good-credit-check customers will be the one who have strong internal capacity. That will be the most important aspect of the lender the banks will consider before approving a loan. He added that before giving a loan, the bank will answer four questions: who is their customer? What are loans used for? How strong are their financial capabilities? and how are their collaterals? 
Although the collateral is the very last aspect for consideration, it dominates the banks’ lending decision. In the case of unsecured loan, along with the evaluation steps, the bank sets up a supervisory mechanism to manage the cash in order to prevent the risk. However, other aspects rely on whether the customers are honest enough to answer the questions and whether they mind having their cash checked and administered by a second party. The story of transparency of the businesses is not easy to say.
Another issue is the performance of the business is still weak; the market is small because of tightened spending of the customers. This impedes the customers to be rated a good-credit-check-customer. Therefore, accessing new capital is always a difficult problem with any business.
Le Minh