Micro enterprises struggle to borrow from banks

Pressure to repay debt early, no collateral... these barriers make it difficult for small businesses to access bank capital.

Mr. Nguyen Manh Ha in Cau Giay, Hanoi has been in the computer and electronic components business for 3 years now, with a fairly stable monthly revenue. At the end of last year, because he wanted to expand his business, he approached several banks to borrow money. After much research, he decided to postpone his investment plan.

While personal loans have interest rates of up to 3,000 VND per day (for one million VND), at the bank, although procedures are quick and there is a form of credit, the pressure to pay off the debt early makes him not dare to take risks."I had to miss this business opportunity to save more money and then think about it later," he said.

Pressure to repay debt early, no collateral... these barriers make it difficult for small businesses to access bank capital.

As the owner of a small-scale agricultural production facility, ready to pay on schedule, Ms. Le Thu Oanh in Phu Nhuan District, Ho Chi Minh City also feels discouraged when borrowing money from the bank.

She said that when she went to the bank, they required her to have a business registration. In addition, because the two apartments - the assets she wanted to mortgage to borrow money - were in the process of getting red books, they were not approved by the credit institution. Therefore, the bank suggested that she switch to a consumer loan instead of a preferential loan with a high interest rate, which made her quite worried.

Mr. Ha and Ms. Oanh are just two of many small business owners facing difficulties in obtaining bank loans. Currently, the country has more than 500,000 small and medium enterprises, accounting for over 97% of the total number of operating businesses. They also contribute 40% of GDP each year and attract 51% of the country's workforce.

Even though business is good and there are assets, problems with procedures, strict lending regulations, and too fast capital recovery... are harsh realities at banks, causing most business owners to not consider this an effective capital mobilization channel.

To overcome the above difficulties, recently, some joint stock commercial banks have implemented preferential policies for small and medium enterprises, including micro enterprises, in the form of mortgage and credit such as Maritime Bank, VPBank, Indovina Bank (IVB), ACB... However, each credit institution has different applicable policies.

As at IVB, if a business proves a feasible production and business plan, ensuring product output, the approval rate for unsecured loans at this bank reaches 80-90% of the total loan amount.

Or at ACB, after evaluating, classifying customers, verifying finances, and planning for reasonable loan usage... businesses will be able to borrow unsecured loans with interest rates depending on the time and potential of the business, and the risk of each loan.

VPBank is offering unsecured loans for micro-enterprises.

Maritime Bank identifies customers as businesses with a minimum revenue of VND 20 billion per year (based on tax reports) along with other diverse credit options.

Deploying the product later than other banks, but since the beginning of last year VPBank has alsohas the first unsecured loan disbursements for small and medium enterprises. This bank isFocus on micro enterprises in the small and medium enterprise segment.

Accordingly, micro-enterprises can borrow mortgages or unsecured loans quickly from banks, with unsecured loans approved in just 5 hours and no minimum revenue requirement. "This is considered the optimal solution for financial problems for small-scale enterprises like Mr. Ha and Ms. Oanh's company," said a VPBank leader.

In addition, this bank is supporting customers who are new businesses to register to use one of its card, credit, and deposit products with many attractive incentives, including the opportunity to travel to Maldives, Korea, Singapore, etc.

According to VNE