Banks loosen purse strings for small businesses
HCM City (VNA) - Instead of lending to large companies, more
and more banks have started to lend to small businesses to hedge their risks.
At several conferences on credit for enterprises, experts have said that helping
small and medium-sized enterprises (SMEs) access bank loans is very important.
However, according to a report by the Vietnam Chamber of Commerce and Industry
(VCCI), 85-90 percent of Vietnamese enterprises are small and micro businesses
that face great difficulty in obtaining credit. Only 40 percent of them have in
fact managed to do so.
Banks are cautious about lending money to SMEs due to a lack of trust in their
ability to repay.
Hoang Thu Huong, from HCM City’s BinhThanh district, runs an online shop selling
sweet dessert and bubble tea and two other drinks and fast food shops. She
wants to expand her business but has been unable to borrow from banks, who told
her that her business is small and she has no assets to mortgage.
She has been forced to borrow from other sources at high interest rates.
Small businesses like Huong’s are caught in a vicious circle: they are too
small for banks to lend, but they cannot get any bigger without bank loans.
Top executives of several banks do not deny this fact, but explained that
though banks are making big profits, their non-performing loan rates are still
high. This was the reason for their reluctance to lend to SMEs, they said.
They said that small and micro businesses cannot seek loans based on their
business performance or financial reports or secure their loans with assets.
Dao Gia
Hung, deputy director of the Vietnam Prosperity Bank’s SMEs Division, said
“Small businesses are often new in the market, and banks only want to lend to
big businesses which have been around for several years. However, whether or
not the banks lend money to those businesses depends much on their appetite for
risk.”
Recently the State Bank of Vietnam (SBV) urged credit institutions and banks to
lend to SMEs.
More and more lenders have announced credit packages for SMEs and micro
businesses.
The An Binh Commercial Joint Stock Bank (ABBank) allows businesses to
borrow up to 3 billion VND (132,000 USD) or 10 percent of their annual revenue
without collateral.
Nguyen Quynh Nga, deputy director of the bank’s SMEs Division, said only big
companies can meet the “traditional requirements” like collateral, high growth,
and good products to get bank loans.
She said with the new package, ABBank would offer unsecured loans to businesses
that have expanded from household businesses to small enterprises within one
year, adding that it would practically appraise their business performance
rather than by looking at their books.
One of the bank’s reasons for giving more unsecured loans
to SMEs is to reduce the big bets it makes on large companies, she added.
PVComBank has also announced a 1.5 trillion VND package with an interest rate
of 7.5 percent.
But enterprises have to secure the loans with personal assets such as property,
savings accounts or cars.
Small businesses that have expanded within six months after starting as
household businesses can also apply for loans.
Nguyen Hoang Minh, deputy director of the SBV’s HCM City Branch, said enhancing
access to unsecured loans would be an effective way to help household
businesses expand into enterprises.-VNA