Small and medium enterprises (SMEs) will be facilitated to borrow up to 70 per cent of their investment capital for projects engaged in government-prioritised supporting industries.
This is one of main contents of a draft circular of the State Bank of Vietnam (SBV) to guide credit support policies for development of supporting industries as stipulated in Decree 111/2015/ND-CP of the Government on development of supporting industries.
According to the draft circular, SMEs will be allowed to borrow up to 70 per cent of investment capital if they meet the following conditions. Firstly, projects must be certified to meet incentives specified in Clause 2, Article 11 of Decree 111/2015/ND-CP. Secondly, projects must be checked, approved and guaranteed by credit institutions.
Notably, borrowers must have a total value of collateral and mortgages at credit institutions equal to at least 15 per cent of the loan value, excluding collateralised and mortgaged assets for other loans.
In addition, they must have at least 20 per cent of investment capital for their investment projects after deducting investment capital for other projects.
Finally, at the time of asking for a guarantee, they must have no tax debts to the State Budget, no bad debts at credit institutions or other economic organisations.
The draft states that the coordination with guaranteeing credit institutions must comply with the regulations of Circular 29/2014/TT-NHNN dated October 9, 2014 of the SBV, Circular 05/2015/TT-NHNN dated May 4, 2015 of the SBV and the relevant regulations.
Finance is a major reason for the weak development of Vietnamese supporting industries, despite its high potential.
Investments in supporting industries require a long payback period and have high risks, while limited financial capabilities are inhibiting domestic companies from investing in these fields.
Meanwhile, most companies run after short-term profits and thus they are quite keen on real estate and securities investments.
Many companies hope that Decree 111/2015/ND-CP, especially the draft decree of the SBV, will facilitate companies to access preferential capital sources for developing supporting industries.
Decree 111/2015/ND-CP specifies that products of six industries: garment and textile, leather and footwear, electronics, automotive manufacturing and assembly, mechanical engineering, and supporting industrial products for high-tech industry are classified as development-prioritised industrial products.
Typical products include natural fibre, synthetic fibre, leather, leatherette, electronic - optoelectronic component, electronic circuits, engine and parts, wheels, automobile exhaust treatment systems, mechanical products, welding machines, agricultural and salt production equipment, shipbuilding equipment, steel, new-generation engines, and others.
S.H
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