Rate cuts & favourable lending conditions to help SMEs

06 Oct '08

3 min read

The Vietnamese trade and industry is sighing with relief due to the improving economic policies in the country.

They now have easier access to term loans along with falling Interest rates and very favourable lending conditions. This in particular is helping the small and medium size companies.

In the latter part of the year there is always a higher demand for funds and the current improved situation will help these companies access capital at reduced costs. Interest rates have gone down by as much as 2- 3 percent since the beginning of this month.

Banks have reduced their lending rates from a high of 21 percent to between 17-20 percent. 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 for SMEs, the lowest rate so far. Lien Viet Bank is also offering an annual lending rate of 18 per cent.

Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank) has set the lending rate of Vietnamese dong at 8.5 per cent per year for exporters which is equal to the lending rate of the US dollar. In return, these borrowers have to commit to selling US dollars to Sacombank when they receive the proceeds.

The Asia Commercial Joint Stock Bank (ACB), used to provide loans to those enterprises that could generate profits equivalent to 15 per cent of their total capital. But now, it was ready to grant loans to any profitable company. At present, the ACB is providing loans at 18.8 and 18.9 per cent a year to enterprises that have good payment history and/or are operating efficiently.

Along with local banks, foreign owned banks are also vying for the share of business with SMEs. Standard Chartered Bank for instance is offering special lending services from two cities. Following them is HSBC which has also started servicing SME companies. ANZ bank is also considering offering special services to these enterprises.

Experts have lauded these new initiatives and say that this would definitely help the SMEs in improving their capital requirements which in turn would be like a stimulus to the overall economy of the country.

A recent poll conducted by The Business Development Institute under the Viet Nam Chamber of Commerce and Industry (VCCI) came out with a few startling facts. Of the 282 companies polled, 85.6 percent needed more capital for the rest of the year and 90.2 percent of enterprises surveyed said that they borrowed money to run their companies.

According to statistics released this week by Credit Department of the State Bank of Viet Nam 163,673 SMEs or 50 per cent of total SMEs, have credit relations with a bank.

Outstanding loans for SMEs have been increasing steadily year after year. As of now loans to SMEs by joint-stock banks account for up to 70 per cent of the banks' outstanding loans while for state owned banks it as high as 95 per cent.

The total amount of loans given to SMEs up to July 2008 touched VND299.47trillion ($18.04 billion) and accounted for 27.3 per cent of total outstanding loans in the country of which 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 in the country are operating effectively and 73.2 per cent have average growth. Only 3.8 per cent had actual finance problems.

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