(VOV) – Vietnamese small and medium-sized enterprises face financial challenges due to domestic and global economic difficulties. On top of the Government’s 1.4 billion USD bailout package, commercial banks have been offering packages to help businesses pay down debts and rally production.

Limited access to bank loans on top of swollen inventories and shrinking markets makes it hard for Vietnamese companies to survive. Bank loans have become less accessible due to high interest rates, inflexible lending requirements, and a shortage of assets for collateral.  Nguyen Tri Kien, Director of the Minh Tien Bag Manufacturing Company, says ‘Commercial banks are imposing extremely tight conditions for loans. For example, it’s time for children to begin a new academic year and we want to borrow 288,000 USD. But with our current assets, we can only borrow 192,000 USD. When we propose inventory as collateral, the banks refuse immediately’.

Commercial banks say that the low loan disbursement is due to the current high company backlogs leading to banks’ fears of the companies not being able to repay the loans. After four lending rate cuts, enterprises have found it a bit easier to approach bank loans. In the first half of this year, Ho Chi Minh City enjoyed credit growth of 0.37%, prioritized to agriculture and rural development, exports, and small and medium - sized enterprises. As soon as the ceiling interest rate was cut for two weeks, half of the businesses in need of loans took advantage of loans with annual interest rates below 15%. Tran Phuong Binh, Director General of East Asia Bank says ‘The East Asia Bank is considering a cut of lending rates for businesses and offering a program of housing loans with a 12% interest rate in the first year’.

Government and bank measures are aimed at helping enterprises avoid bankruptcy or closure. But businesses say the State Bank of Vietnam should ease interest rates below 10% as they are now 4% above rates elsewhere in the region. Nguyen Thi Hong, Vice Chairwoman of Ho Chi Minh City’s People’s Committee, says ‘The municipal authorities have developed cooperative models in which banks and enterprises can link up to achieve joint growth’.

The State Bank of Vietnam has asked its branches nationwide to cooperate with commercial banks to ease the difficulties faced by enterprises. Central bank Governor Nguyen Van Binh says ‘The State bank of Vietnam will recognize the contributions of any banks active in helping companies to obtain production loans. Otherwise penalties are likely to be imposed. In the short term, we encourage banks and enterprises to help each other under the central bank’s close supervision’.

The Government’s bailout package for local enterprises is expected to increase the country’s GDP by 1% this year.

VOV