Seeking To Unlock Funds for Businesses

In 2023, Vietnam's interest rates which are being considered still high will hurt businesses. Thus, there is a dire need for active support of the Government and banks and ongoing efforts from businesses themselves.

High-interest rates are hurting the ability of businesses to recover and hampering economic recovery

High-interest rates

According to Dr. Vu Dinh Anh, an economic expert, Vietnam's biggest challenge in 2023 will be global economic impacts due to its large economic openness. Therefore, recession, inflation, or political fluctuations all affect Vietnamese exporters - one of the important growth pillars.

Our financial market, money market, bank credit, real estate market and securities market have faced numerous hardships since 2022. Making these markets strong is also a big challenge for the Vietnamese economy in 2023.

“Especially, during 2020-2021, the business community was hit hard in all aspects by the Covid-19 epidemic, from supply to demand, and a vast majority of companies had to face unprecedented difficulties. Therefore, in 2022, the Government and the National Assembly launched a socioeconomic recovery and development package, implemented in 2022 and 2023. Nevertheless, this kindled some to rely on State support rather than assess their own business,” he said.

From a banking perspective, Mr. Dao Gia Hung, Deputy Director of VPBank's SME Banking Division, said that access to capital for enterprises, especially SMEs, will be still hard to a certain extent, stemming from two factors. Firstly, the market will continue to be driven by interest rates, inflation and credit room policy.

Secondly, the business community is struggling with their own difficulties such as insufficient collateral and disqualified governance, operation and scale. These factors hinder SMEs from accessing capital.

Hung admitted that it will be relatively hard to forecast interest rates in 2023, citing that we need to base on internal situations, past developments, especially in 2022, to outline a picture of interest rates in 2023. Interest rates are likely to be high and not to decline soon. Rates will probably look up but the extent will be less than in the past or stay the same. This is also what is expected with interest rates in the world.

Another important factor is Vietnam's internal situation. The Government is determined to mobilize all forces, including the banking system, fundraising channels of the economy and the business community, to seek ways to lower interest rates and ease access to credit for businesses,” he stressed.

Efforts from the business

Regarding solutions, Hung stated that companies that are finding it hard to access capital need to go right into their core businesses and must provide transparent financial data and operational data, the more the better. At the same time, banks should offer different products amid high-interest rates. Companies should have a careful calculation of future cash flows after they borrow money from banks. Borrowing money is a hard nut to crack but how to use it smartly and effectively is harder work.

Banks should also prepare for this scenario. First, they should always seek for capital sources from international organizations, with more preferences than the market, to finance the economy. Or, they should prepare more diverse products, particularly digitization, which is a consistent task and needs well-prepared investment.

In addition, banking personnel will continue to be more skilled in service and knowledge of customers’ needs. They should be more cautious but also more supportive.

Dr. Mac Quoc Anh, Vice Chairman of Hanoi SME Association, said that, in 2023, it is not actually difficult to access capital sources with reasonable interest rates, with proper regulation or macro direction of the Government and the National Assembly, but the important matter is whether businesses can meet requirements imposed by banks.

Businesses need to keep a stable, long-term relationship with the banking system while the latter also always wants to find people and businesses that have transparent credit, use loans for the right purposes and have long-term relations.

Given current actual conditions, based on many factors of international economic integration, the increase or decrease of interest rates in Vietnam still depends a lot on regional and global finance, he said. Enterprises themselves, especially SMEs, need to adjust and cut resources and unreasonable costs and make risk provisions to satisfy borrowing conditions imposed by the banking system.

“From the association's side, we will definitely have to group sectors and fields that are in difficulty, from manufacturing and trade to services, to deliver direct supports. We will invite banks and securities companies to advise and support businesses in terms of procedures, documents, training and capacity building for their financial officers.

Besides, we will closely cooperate with FDI companies in Hanoi and other provinces to draw more projects and investors and offer them to use products and services of Vietnamese enterprises" said Dr. Mac Quoc Anh.

Sharing his views, Dr. Vu Dinh Anh said, businesses have a lot of work to do. They are pioneering soldiers on the economic front, so they always have to face fluctuations and negative factors from both the international and domestic markets.

The first matter is that they must always be active in their business and production plans in all cases. The second is they must do their best to strengthen their initiatives, and reduce their reliance on State support.

The third is when companies assess situations and face difficulties, they necessarily pay attention to subjective or objective causes. If it is an objective cause, it can be suggested to relevant bodies but if it is a subjective cause, they must deal with it by themselves.

Source:  Vietnam Business Forum