Rural Businesses Face Difficulties Accessing Bank Loans

Rural Businesses Face Difficulties Accessing Bank Loans

Restrictive rules governing guarantees for credit are keeping rural businesses and cooperatives from getting bank loans, a survey by the Central Institute for Economic Management has found.

The study, which looked at 300 rural and household businesses in eight provinces and cities, revealed that 75.2 per cent of rural businesses and 81 per cent of household businesses complained that borrowing from banks was very difficult.

The finding was supported by chairman of northern Bac Ninh province’s Tu Son district who said that 100 local firms had been hampered by a shortage of capital in the first three months of this year.

Many complained that too many unnecessary procedures were applied to the raising of a loan, he said.

Banks often required potential borrowers to show financial reports and contracts or offer properties for mortgage that many newly-established enterprises did not have, a chief accountant for a limited company in Tu Son district said.

Instead, many borrowed from their friends, relatives and other sources, he said.

Another businessman from northern Ha Tay province also criticized the banks’ bias against privately owned enterprises as they often refuse to provide them long-term loans.

Most of the cooperatives in Vietnam also often complain of inadequate access to bank loans. Of the 9,300 working enterprises, only 11 per cent have frequent contact with the banks and credit institutions, according to statistics of the Vietnam Cooperative Alliance (VCA).

The cooperatives employ more than 10.5 million farmers and workers but their small-scale production and limited competitiveness makes it difficult for them to raise bank loans, VCA said, reporting the average value of a cooperative’s fixed assets at just VND300 million (US$19,000).

The shortage of money is the main reason that stops such small private businesses from upgrading technology and expanding production, VCA also said. Only 12.5 per cent of cooperative production is mechanized against 37 per cent at State-owned enterprises, it added.

There is currently no available number of all rural businesses in Vietnam as well as their combined capital and workforce. According to the latest statistics, rural areas cover as much as 75 per cent of the country.

VNS