Commercial banks need to change their perception of small and medium-sized businesses to boost lending for businesses, said head of the Central Institute for Economic Management (CIEM) Vo Tri Thanh.

He added that many banks are unwilling to provide loans to the small- and medium-sized business (SME) community due to low profits and additional expenses. This perception should change and SMEs should also reorganise their administrative affairs and production, while improving their links with banks, according to Tin Tuc newspaper.

Thanh affirmed that SMEs outnumber big firms and can generate a large credit market. Therefore, banks should pay more attention to SMEs because this will benefit the banks too.

According to Thanh, there are credit guarantee funds for SMEs across the world. However, some work well, while some others do not. In Vietnam, the fund is not necessarily guaranteed by the State so that private companies, associations, and unions can join it to improve their guarantee levels and credibility and enable them to access bank loans.

Cao Sy Kiem, Chairman of the Vietnam Association of Small and Medium-Sized Enterprises, said that it needs to strengthen the links between SMEs, and help them in all aspects of cooperation, financial support, legal consultation and market expansion to become a strong SMEs community with transparent activities to increase their access to bank loans.

According to Tran Quoc Hung, Deputy Director of the State Bank of Vietnam's branch in Hanoi, over the past three months, around 23 commercial banks and branches of all commercial banks have registered to participate in a programme to boost links between banks and businesses, with a committed loan of 17.8 trillion VND (838 million USD).

Nguyen Hoang Minh, Deputy Director of the State Bank's branch in Ho Chi Minh City, said that under this programme, the amount of non-collateral loan given, as of July 10, was 15.6 trillion VND (732 million USD), accounting for 17 to 18 percent of the total outstanding loans. A Vietinbank leader, who did not wish to be identified, said that his bank has established an ad-hoc credit unit to help SMEs get access to loans.

This unit will be responsible for collecting reliable information about banking, finance, production and the performance of businesses.

To promote trust in lending, Deputy Governor of the central bank Nguyen Thi Hong said that banks have their regulations for trust loans and commercial banks have their own unique products.

Banks have to assess the business plans, financial capability and the repayment capacity of the borrowers.

In Vietnam, banks face difficulties in getting information about the borrowers. Thus, the bank governor wants closer links between banks and businesses with the participation of the local authorities who know about the performance of firms operating in their provinces. By doing so, banks will have more information about the borrowers.

Kiem said that in this context, besides the support from the State, banks and enterprises must work together to resolve the difficulties.

In addition, businesses themselves have to use advanced administrative management methods to utilise the bank loan effectively.-VNA