Illustrative photo (Photo: vneconomy.vn) Hanoi (VNA) - Though the Small and Medium Enterprise (SME) Development Fund was established a year ago, so far only three firms have got loans from it, fund director Hoang Thi Hong said.
The SME fund has a registered capital of 2 trillion VND (88.8 million USD).
The three companies, which received loans worth 15 billion VND, are involved in innovation and the manufacturing industry.
Since its establishment, 1,000 enterprises have been advised of its borrowing procedures, and 20 applied for loans worth a total of 250 billion VND, according to Hong. However, after the appraisal process, the fund offered loans to only three enterprises.
The result is exceptional considering the fund’s target and its preferential policies. The fund is expected to provide loans worth 560 billion VND by 2017.
As a rule, the fund will provide businesses with a maximum of 70 percent of a project’s capital at an interest rate of 5 percent per year for one-year loans and 7 percent per year for medium- and long-term loans. The maximum loan period is seven years.
One of the advantages of the fund, compared to bank loans, is that to borrow money, businesses can use assets formed from loans [output of their projects] as collateral. Also, usually, bank requires SMEs to mortgage assets whose value is 100 to 150 percent of the loan. When borrowing from this fund, the collateral value does not need to exceed 100 percent of the loan value.
The fund has four programmes for different types of enterprises: innovative businesses; processing and manufacturing enterprises; agriculture, forestry and fisheries; water supply, management and treatment of waste water and waste. The maximum loan for each enterprise is between 10 billion VND and 25 billion VND, depending on the type of enterprise.
Nguyen Huu Quang, director of Forestry Products Processing for Export Company in the central province of Thanh Haa, told Tien Phong (the Vanguard) newspaper, that the loan is not easily accessible to businesses. “We are expanding our factory so we need to borrow around 20 billion VND to import machinery and equipment, but all applications have to wait for the evaluation of a science and technology committee as well as the trust bank,” Quang said.
Dang Huy Dong, chairman of SME Development Fund and Deputy Minister of Planning and Investment, was quoted by the newspaper as saying that the biggest obstacle is in the process of project assessment conducted by trust banks, and financial procedures.
Many enterprises do not have the experience in presenting their projects, so they are unable to convince the appraisal council, according to Dong.
Enterprises also fail to provide transparent financial information, or to have projects for the purpose that the fund has been set up for.
Another problem is that businesses ask for loans higher than the actual cost of the project. “There are situations when a company sets up many loan projects simultaneously in an effort to get some loan sanctioned, or sometimes an individual represents many companies to apply for a loan,” Hong said.
In addition, the lending limit for some sectors is too low, so it does not motivate businesses to file applications for loans with the fund, a trust bank representative explained, on condition of anonymity.
The SME Development Fund was established under Decision No 601/QD-TTg, dated April 17, 2013, by the then Prime Minister. It is a State-owned financial institution under the Ministry of Planning and Investment, and its chartered capital of 2 trillion VND has been allocated from State budget. — VNA
The SME fund has a registered capital of 2 trillion VND (88.8 million USD).
The three companies, which received loans worth 15 billion VND, are involved in innovation and the manufacturing industry.
Since its establishment, 1,000 enterprises have been advised of its borrowing procedures, and 20 applied for loans worth a total of 250 billion VND, according to Hong. However, after the appraisal process, the fund offered loans to only three enterprises.
The result is exceptional considering the fund’s target and its preferential policies. The fund is expected to provide loans worth 560 billion VND by 2017.
As a rule, the fund will provide businesses with a maximum of 70 percent of a project’s capital at an interest rate of 5 percent per year for one-year loans and 7 percent per year for medium- and long-term loans. The maximum loan period is seven years.
One of the advantages of the fund, compared to bank loans, is that to borrow money, businesses can use assets formed from loans [output of their projects] as collateral. Also, usually, bank requires SMEs to mortgage assets whose value is 100 to 150 percent of the loan. When borrowing from this fund, the collateral value does not need to exceed 100 percent of the loan value.
The fund has four programmes for different types of enterprises: innovative businesses; processing and manufacturing enterprises; agriculture, forestry and fisheries; water supply, management and treatment of waste water and waste. The maximum loan for each enterprise is between 10 billion VND and 25 billion VND, depending on the type of enterprise.
Nguyen Huu Quang, director of Forestry Products Processing for Export Company in the central province of Thanh Haa, told Tien Phong (the Vanguard) newspaper, that the loan is not easily accessible to businesses. “We are expanding our factory so we need to borrow around 20 billion VND to import machinery and equipment, but all applications have to wait for the evaluation of a science and technology committee as well as the trust bank,” Quang said.
Dang Huy Dong, chairman of SME Development Fund and Deputy Minister of Planning and Investment, was quoted by the newspaper as saying that the biggest obstacle is in the process of project assessment conducted by trust banks, and financial procedures.
Many enterprises do not have the experience in presenting their projects, so they are unable to convince the appraisal council, according to Dong.
Enterprises also fail to provide transparent financial information, or to have projects for the purpose that the fund has been set up for.
Another problem is that businesses ask for loans higher than the actual cost of the project. “There are situations when a company sets up many loan projects simultaneously in an effort to get some loan sanctioned, or sometimes an individual represents many companies to apply for a loan,” Hong said.
In addition, the lending limit for some sectors is too low, so it does not motivate businesses to file applications for loans with the fund, a trust bank representative explained, on condition of anonymity.
The SME Development Fund was established under Decision No 601/QD-TTg, dated April 17, 2013, by the then Prime Minister. It is a State-owned financial institution under the Ministry of Planning and Investment, and its chartered capital of 2 trillion VND has been allocated from State budget. — VNA
VNA
