Lower interest rates stimulate investment in production.

(Baonghean)The economy continues to weaken, and inventories remain high. In response, interest rates have been continuously adjusted downwards since the beginning of the year to their lowest levels in recent years, aiming to support businesses in stimulating production and goods circulation. This has initially created positive signals for both banks and businesses.

For a long time, people have talked about business inventory, but in the first few months of 2013, another entity with inventory emerged: bank capital. The stagnation of capital in banks most accurately reflects the serious impact on the economy's ability to absorb capital and its production capacity. Lowering interest rates to share the burden with businesses, encourage production, stimulate goods circulation, and release inventory is considered a strong and rapid measure to the economy.

At the Nghe An branch of the Vietnam Investment and Development Bank (BIDV), nine preferential interest rate packages have been offered to corporate and individual customers since the beginning of March. Among them, the package for corporate customers with loans under 3 months, at an interest rate of 7.5%/year, was fully disbursed shortly after its launch. The package for individual customers borrowing for production and business purposes offered an interest rate of 9%/year for the first 3 months.

In particular, the corporate loan package with a term of less than 6 months and an interest rate of 8.5%/year has facilitated access to affordable capital for many customers at a suitable time for investment in production, business, and capital turnover. Along with these preferential interest rate packages, from May 13, 2013, to share the difficulties with businesses and households in production and business, the Branch has assessed and reviewed outstanding balances of old loans with interest rates higher than 13%/year, adjusting them to a maximum of 13%/year. With a total outstanding balance of nearly 1,000 billion VND, interest rates above 13%/year have been adjusted to the maximum level of 13%/year.

According to Ms. Le Thi Ly, Head of Risk Management Department at the Investment & Development Commercial Bank of Nghe An: “The impact of interest rate support packages is significant, creating a strong impetus to boost credit growth in April. While the branch experienced negative credit growth in the first three months of the year, in April, the branch's outstanding loan balance increased by 5% compared to March. This is an opportunity for businesses to take advantage of low-interest loans, providing positive support for production and business. On the other hand, some customers have improved their financial situation, leading to an increase in their credit rating and outstanding loan balances.”

For the Agribank Nghe An branch, the reduction in lending interest rates has significantly boosted credit growth. By early May, outstanding loans had increased by approximately 6.7% compared to the beginning of the year. The capital is primarily invested in agriculture and rural areas, providing loans to farmers for production, seasonal expenses, and home repairs. According to the leadership of Agribank Nghe An, the branch is actively mobilizing idle capital to meet customer demand while simultaneously reducing lending interest rates to alleviate difficulties for businesses and households. However, loan conditions remain stricter than before.

The Director of Vietcombank Vinh branch stated: The sharp reduction in interest rates has quickly had a positive effect, increasing the demand for loans and allowing cheap capital to flow into the economy. At Vietcombank Vinh, as of mid-May 2013, outstanding loans increased by 12% compared to the beginning of the year, with the lowest lending interest rate at 7.5%/year and the highest at 13%/year.

From the business perspective, Mr. Nguyen Dinh Sinh, Director of Austdoor Nghe An Joint Stock Company, happily shared: “In previous years, our company borrowed capital at interest rates of approximately 22% per year. Currently, we have access to capital at an interest rate of 11% per year, which has reduced interest costs by half compared to the highest interest rate period. This creates more favorable conditions for the business to invest in expanding production and making our products more competitive in the market. Despite the current general difficulties, our company has maintained stable production, ensuring jobs and wages for our workers.”

Manufacturing of roller doors at Austdoor Nghe An Joint Stock Company.

Ms. Nguyen Thi Loan, Deputy Director of Viet My Co., Ltd., shared: "Our company specializes in producing NPK fertilizers and trading them, primarily serving the rural agricultural market. At times, bank loan interest rates were over 22% per year, while our company regularly lends fertilizer to farmers from the beginning of the planting season, with payment due at the end (without interest), making things very difficult for us. Recently, we borrowed 8.5 billion VND from a commercial joint-stock bank at an interest rate of 10% per year. With relatively cheap capital, the company focused on investing in the production of approximately 1,000 tons of NPK fertilizer to serve the summer-autumn crop. Currently, our products are in circulation, and we sell everything we produce."

Through discussions with businesses, it has been learned that interest rates are no longer as a major concern as in previous years. The most pressing issue at this time is market demand. How can we boost product circulation when market purchasing power remains sluggish? This is the biggest worry for manufacturing businesses today. This very barrier is the reason why businesses haven't invested heavily in production...

Quynh Lan