Workers at an SME specialising in cashew export in the southern province of Binh Phuoc (Photo: VNA) The rate cut is to facilitate SMEs’ integration into domestic andglobal value chains, according to the proposal, which is part of a draftdecree on the organisation and activities of Vietnam’s Small and Medium-sizedEnterprise Development Fund.
While pending the government's review, the proposal has been well noted andreceived by the business community, especially by Vietnamese SMEs.
"It would be a tremendous help to us if we could borrow fromthe fund at further discounted rates, which would reduce our financial pressureand allow us to focus on production," said Vu Xuan Anh, CEO of a packagingcompany in the northern province of Hai Duong.
He added his company's core products, which are wrapping paper and plasticfilm, thanks to the development fund's financial support, could be priced about15% lower than imported products while remaining competitive in quality. By hisestimation, the company saved up to 700 million VND on interest rates alonelast year.
The development fund, according to MPI, has disbursed nearly 600 billion VNDsince 2016 to nearly 40 startup SMEs. It has played a vital role in supportingsaid SMEs to focus on the innovation of products, and participate in thecountry's supply and value chains.
While the figure may seem modest for SMEs' demand for lower-cost financingthere have been upticks in recent months. During the first six months of 2023alone, the fund has granted 260 billion VND to eight SMEs, or 87% of itsannual target.
According to a representative from the fund's management board, there is aplan to further cut interest rates for SMEs in the future, which is in linewith the Vietnamese Government's initiative to increase support for SMEs.
"We normally based our interest rates on the lowest among Vietnam’slargest commercial banks. From there, we could further reduce rates by another20%," said Pham Xuan Kien, chairman of the fund's council.
For now, the fund's registered capital has reached 837 billion VND. However,depending on demand and business qualifications it could be increased to over 2trillion VND in the future.
Nguyen Dinh Cung, former director of the Central Institute for EconomicManagement (CIEM) said the fund should seek out potential contributors amonginvestors and banks.
In addition, it should prioritise establishing its own set of criteria andprotocols to work directly with SMEs instead of lending through commercialbanks as of now.
Last year’s data showed that Vietnam was home to nearly 800,000 SMEs.Vietnamese SMEs accounted for 98% of all registered businesses, created 70% ofall employment and generated about 50% of the country's GDP.
Besides raw numbers, the country's SMEs often play an importantrole in innovation, regional development, export and economicdiversification./.
VNA
