SMEs welcome rate cuts, increased stability
SMEs welcome rate cuts, increased stability
Customers at Maritime Bank. Reduced interest rates, more flexible lending policies and easier loan terms are helping local companies to stabilise their operations. — VNA/VNS Photo Tran Viet
HCM CITY — Reduced interest rates, more flexible lending policies and easier loan terms are helping local companies, especially small and medium-sized enterprises (SMEs), to stabilise their operations.
“In the latter part of each year, enterprises always need more capital. A cut in the lending rate will help enterprises access capital more easily and reduce capital costs,” said Cao Si Kiem, chairman of the Association for Small and Medium Enterprises.
Nguyen Hoang Vu, deputy director of the Import-Export, Economic Co-operation Joint Stock Company, said that over the last two weeks his company was able to continue borrowing from banks to develop his business because the rates on short-term loans were reduced by 1.3 per cent to 19.5 per cent per year.
The company’s business had been constrained for months because interest rates on loans were too high, Vu said.
Nguyen Tung Duong, deputy director of the GODACO Seafood Company in Tien Giang Province, also said that the company was using bank loans with the rate of 20.2 per cent on the Vietnamese dong, and the rate of 8 per cent on the US dollar as against 8.4 per cent in August.
A series of state-owned commercial banks and joint stock commercial banks have already cut their lending interest rates to between 17.5 and 20 per cent against the current ceiling of 21 per cent.
The Export-Import Commercial Joint Stock Bank (Eximbank) has set aside VND3 trillion (US$180.72 million) for loans with a preferential interest rate of 17.5 per cent to grant SMEs, the lowest rate so far. Lien Viet Bank is also offering an annual lending rate of 18 per cent.
The Bank for Investment and Development of Viet Nam (BIDV), another State-owned bank in Ha Noi, offers SMEs an annual rate of 17.8 per cent, compared to the average lending rate of 18 per cent among commercial banks.
Also from October 1, Bank for Foreign Trade of Viet Nam (Vietcombank) spared VND3 trillion ($180.61 million) for SMEs at an unreleased interest rate. Another state owned bank, Agriculture and Rural Development Bank (Agribank) slashed its ceiling rate on loans provided for regular customers from 20 per cent to 19 per cent and lowered the rate from 20 per cent to 19.5 per cent for other enterprises.
Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank) has announced an offer for exporters to set the lending rate of Vietnamese dong at 8.5 per cent per year – equal to the lending rate of the US dollar. In return, these borrowers have to commit to selling US dollars to Sacombank after export.
The Dong A Commercial Joint Stock Bank, or DongA Bank, has, meanwhile, resumed lending to enterprises involved in property projects at 20.4 per cent a year. The bank is lending at 19.2 per cent to enterprises involved in export activities and gives an 18.96 per cent rate to special clients.
In addition to the rate cut, many banks have also relaxed their lending conditions.
Do Minh Toan, deputy general director of the Asia Commercial Joint Stock Bank (ACB), said in the past the bank had provided loans only to enterprises that could make profits account for 15 per cent of their total capital. But now, it was ready to grant loans to any profitable company.
At present, the ACB is giving loans at 18.8 and 18.9 per cent a year to enterprises that have good payment history and/ or are demonstrably operating effectively.
“Cutting lending interest rates will lift difficulties for enterprises, especially for SMEs. However, enterprises should try to increase their equity and to cut input costs to produce a profit of 15 per cent per year, by themselves,” Kiem said.
At the same time, foreign banks in Viet Nam are also offering services for SMEs.
London-based Standard Chartered Bank has been offering special lending services for SMEs for over a year in HCM City and for two months in Ha Noi. Following that trend, Hong Kong and Shanghai Banking Corp (HSBC) has just introduced new services serving SMEs in the local market.
Thomas Tobin, director of HSBC Viet Nam, said the importance of SMEs in the Vietnamese market can not be denied. In many markets where HSBC operates, SMEs account for 97 per cent of the total enterprises and contribute a great deal to Gross Domestic Products (GDP).
Australia and New Zealand Banking Group (ANZ) was also preparing to begin special services for SMEs in Viet Nam, said a representative of ANZ who asked to remain anonymous.
According to independent market watchers, the banks’ moves are of great significance. They would help SMEs to partially settle their current serious capital shortage, thus stimulating them to continue producing and create stable commodity sources for markets at home and abroad.
The Business Development Institute under the Viet Nam Chamber of Commerce and Industry (VCCI) released that most enterprises in all economic sectors were short of money and mainly use banks as the key source of funds.
Of 282 businesses polled in a recent survey, 85.6 per cent needed more capital for the rest of the year. The survey also found that 90.2 per cent of local private enterprises surveyed said they needed to borrow money, with state-owned enterprises accounting for 81.5 per cent and foreign invested companies, 57.7 per cent.
According to statistics of the Credit Department of the State Bank of Viet Nam released this week, 163,673 SMEs, or 50 per cent of total SMEs, now have credit relations with a bank.
Outstanding loans for SMEs have been increasing steadily year after year. Loans to SMEs by many joint-stock banks have accounted for up to 70 per cent of the banks’ outstanding loans; for some state-owned bank branches this figure is as high as 95 per cent of their total outstanding loans.
The total amount of outstanding loans given to SMEs, through July 31, 2008, had reached VND299.47trillion ($18.04 billion), accounting for 27.3 per cent of total outstanding loans in the national economy, an increase of 16.65 per cent compared to 2007 and 70.5 per cent compared to 2006. Of this amount, short-term loans accounted for 73.05 per cent, while medium and long-term loans were 26.95 per cent.
About 23 per cent of SMEs are operating effectively and 73.2 per cent have had average growth. Only 3.8 per cent had recognised capital difficulties. — VNS
By : http://vietnamnews.vnagency.com.vn
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