Credit solutions for small and medium enterprises

(Baonghean.vn) – Small and medium enterprises account for 98% of operating enterprises, but only about 30% have access to commercial bank capital – a significant barrier for enterprises today in developing production and business.

According to the World Bank (WB) ranking, Vietnam's business environment index increased 14 places this year, but nearly 60% of businesses are still operating without profit.

In the first 10 months of this year, the number of newly established enterprises was more than 100,000, but the number of dissolved or temporarily suspended enterprises also reached 60,000.

Small and medium-sized enterprises employ about 50% of the economy's workforce and contribute about 45% of GDP annually, but the number of these enterprises that have access to capital from commercial banks is only approximately 30%.

Dr. Can Van Luc - finance and banking expert informs about the current situation of capital access of SMEs. Photo: TC

At the workshop, Dr. Can Van Luc - a finance and banking expert, said that the reason is that small and medium enterprises have limited financial capacity. According to the General Statistics Office, the proportion of small and medium enterprises with capital under 5 billion VND is still the majority. Enterprises have not yet established a strategy to convince sponsors, and have not yet built long-term business strategic goals.

Besides, the complex business environment and high costs are also current difficulties for businesses when accessing bank loans.

“Interest rates are not the biggest obstacle at present, but the most worrying thing is the procedures and unofficial costs. According to the PCI report, about 66% of businesses pay unofficial costs, many businesses believe that corruption when handling procedures is common. That difficulty requires the participation of banks, departments, associations…” – Dr. Can Van Luc emphasized.

Delegates attending the workshop. Photo: TC

However, banks also face many difficulties and challenges when lending to SMEs. These include businesses lacking collateral, lack of transparency in information, limited ability to meet loan application requirements, lack of feasible business plans, and businesses being reluctant to complete loan collection.

In addition, businesses are not used to buying risk insurance, still paying in cash, or the problem of criminalizing economic relations... also makes it difficult for banks to control cash flow and hesitant to lend capital.

Mr. Tran Van Tan - Deputy Director of the Department of Credit for Economic Sectors, State Bank of Vietnam spoke at the workshop. Photo: TC

Mr. Tran Van Tan - Deputy Director of the Department of Credit for Economic Sectors, State Bank said: In that situation, the State Bank has had a number of policy mechanisms and initiatives such as the program connecting banks and enterprises, commercial banks launching many diverse credit packages to support SMEs, establishing a SME development fund, and a SME credit guarantee fund.

"However, banking solutions can only be truly effective when there is harmonious coordination between agencies, ministries, associations and businesses themselves. SMEs themselves must also improve themselves, comply with legal regulations and proactively provide complete and honest information to enhance their reputation with credit institutions; participate in production and business activities according to the product value chain, creating conditions for credit institutions to control cash flow and financial situation of businesses during the borrowing process" - Mr. Tan said.

Produced at Dinh Nhan Iron and Steel Company Limited. Photo: TC

Sharing at the workshop, some SMEs said that borrowing capital through conventional mortgages has become difficult and businesses are at risk of losing opportunities to cooperate and expand the market. Lack of capital not only causes potential businesses to miss opportunities to develop, but is also a barrier that causes many business ideas to remain on paper.

To remove difficulties and support businesses in accessing capital, at the workshop, a number of experts and businesses recommended that the Government, ministries, branches and relevant associations promptly issue guidelines for the Law on Support for SMEs, focusing on removing obstacles for businesses; Promote the effective implementation of issued support policies; Promote the operation of the SME guarantee fund and the SME development fund; Build a system of information on markets, products and partners to support businesses, and urge drastic improvements in the investment environment...

Tung Chi