The central city of Da Nang has debuted the Credit Guarantee Fund to provide financial assistance to businesses facing bankruptcy.

The fund will reach 100 billion VND (4.8 million USD), of which 30 billion VND (1.43 million USD) will come from the city's budget and 70 percent from banks and large firms.

Vice Chairman and General Secretary of the city's Small-and Medium-sized Enterprises Association (SMEs), Nguyen Van Ly, confirmed the creation of the fund to Vietnam News during a year-end meeting.

The decision, which was announced on the last day of the year, is to provide urgent action to revive poorly running businesses.

Over 1,200 enterprises - 10 percent of total businesses in Da Nang - were dissolved or closed due to poor operations and deficient loans last year.

Officials note that SMEs contribute over 60 percent of the city's GDP annually.

"It's an initial support from the city and the association to help businesses that have insufficient funding over the past years. However, the fund is not able to save all enterprises from bankruptcy," Ly said.

"We plan to offer loans at 9 percent interest for a maximum 3 billion VND (143,000 USD) loan, with strict examinations as of 2014," he explained.

He added that 50 percent of the enterprises are trading and manufacturing companies with registered capital from 500 million VND (24,000 USD) to 1 billion USD (48,000 USD).

Ly also complained that many businesses have received loans with interest rates of 9 and 13 percent.

Nguyen Thi Thien Kim, manager of a steel company, said her company was one of several businesses that received 9 percent and 13 percent loans from banks last year.

"It's a challenge. Businesses have to work with strict regulations set by banks if they want access to preferential interest rate loans," Kim said.

"Of course, profitable companies would receive low interest loans, but its is blocked to small sized enterprises that had previous debts," she said.

In a meeting of the municipal People's Council last year, Director of the State Bank's Da Nang branch, Vo Minh, said most banks in Da Nang are branches, so they had to ask permission from their headquarters to grant loans with values of 2 billion VND (95,000 USD).

Minh noted that credit balances at banks operated under different regulations last year.

"Fund mobilisation grew 12.3 percent last year, but loans being distributed were only at 1.25 percent. Strict regulations on loans were given to control bad debts and risks, but it tightened the growth of credit, as well," Minh said.

According to SMEs' Vice Chairman Ly, the city will create a strategy to renew investments in the city by designating this year as the Year of Enterprises.

"We propose the city extend debts and grant businesses priorities on land prices and taxes to produce lower-priced products and reduce inventories," he said.

He emphasized that speculation in the real estate sector, which has stagnated for years, resulted in bankruptcy for businesses in the city.

According to the Vice Chairman of the city's Property Association, Vo Van Cuong, sales of real estate in Da Nang last year saw a decline of 80 percent, with an estimated 12,000 plots of land from 26 projects being available. In the latest report, the city said it received nearly 1.9 trillion VND (90 million USD) from land-use taxes – just 4.5 percent of the city's budget of 8.6 trillion VND (409 million USD) last year.-VNA