Although many meetings to discuss resolutions to capital difficulties for small and medium enterprises (SMEs) have been held, both sides still remain entrenched.
What do banks say?
Over 20 years ago, Bao Tin Minh Chau Jewellery & Gemstone Company was set up by a small amount of tael borrowed from individuals. Prime Group, the largest ceramic brick supply in Vietnam, was established in 1999 by bank loans. The time to success of Prime Group at least halved that of Bao Tin Minh Chau Jewellery & Gemstone Company. This was because the capital sources Prime Group borrowed from banks were larger and could focus on expansion phases. This is why many SMEs asked for loans from banks. However, it is not easy to get a bank loan.
A survey on SME actuality conducted by the Enterprise Development Department under the Ministry of Planning and Investment showed that only 32.28 per cent of SMEs had access to bank loans, 35.24 per cent found it hard to approach banks and 32.38 per cent could not access them at all. A third of SMEs are able to seek loans from banks while 80 per cent capital sources for SMEs come from banks. Nonetheless, leaders of several banks have different answers. General Director of Vietnam International Commercial Joint Stock Bank (VIBank) Le Dinh Long said the judgement that SMEs find it hard to access bank loans is generally incorrect. It is only correct to specific individuals. Mr. Long confirmed the access to bank loans for SMEs would be wider as banks will loosen its lending conditions.
General Director of the Industrial and Commercial Bank of Vietnam (Incombank) Pham Huy Hung added the approach to bank loan would be further widened. Ms Lan Anh, chief of the SME Credit Department of Incombank, explained for this issue that “Banks are also borrowers, thus, they must have certain criteria to assess enterprises. We don’t lack capital for enterprises if enterprises meet lending criteria.”
What are the reasons for this?
In fact, only a few enterprises cannot borrow bank loans or be provided commercial credits. Otherwise, the conditions are so hard and disadvantageous because they lack guaranteed assets. Meanwhile, enterprises still have assets of high liquidity like stored commodities, materials and other asset rights but they cannot give them as security for loans because legal regulations are unclear.
Commenting on this reality and providing reasons, Ms Nguyen Thi Son, Director of Legal Science and International Business Institute, said that one of the shortcomings enterprises normally mention is the subjective reason from banks. Many enterprises are capable of mortgaging their assets for loans but cannot borrow money because bank officials under-evaluate assets, normally equal to a third of actual value of the collaterals. Previously, Hung Phat Co. Ltd, for example, could not borrow bank loans because it had no mortgage and now it had a small sum of capital in hand, the security condition is a high hurdle for an SME like Hung Phat.
Many other SMEs are also free from bank loans because they cannot improve the feasibility of their projects. Ms Duong Thi Hai Ha, Director of Hai Gia Co. Ltd, complained, “Last year, our company needed borrow money to expand production but having no mortgage. In spite of our proof of the success of the project, banks still refused. The reason was the capacity of bank officials who lack knowledge to understand our project thoroughly.”
Several other reasons for narrowing access to bank loans are insufficient information of the banks themselves. In particular, the asset examination and evaluation procedures are complicated while the instructive information for borrowing formalities is limited. However, both enterprises and banks confessed that the lack of capital also comes from enterprises themselves. A lot of enterprises “disappeared” from their head offices after establishment and operations of SMEs are almost unknown. Financial reports lack reliability and the bank loan ratio is much higher than that of corporations and households.
The potentiality of SME block, which contributes 40 per cent to GDP and creates 12 million jobs, is on the focus of commercial banks. Hence, the answer to capital matter for nearly 180,000 SMEs is hard to find with big shifts from both sides.
Vietnamese
