Why is bank credit growth low?
(Baonghean.vn) - Since the end of 2022, the domestic economy has faced many difficulties, causing very low credit growth. To increase capital absorption capacity and improve the health of the economy, synchronous solutions are needed...
Many factors affect credit growth
Although banks have conditions to increase credit in the first months of the year due to abundant system liquidity and not being limited by credit growth targets, the credit growth rate of the whole system is still low compared to the same period of previous years.
By June 30, 2023, credit in the entire economy increased by 4.73% compared to the beginning of the year, lower than the same period last year (increased by 9.35% in the first 6 months of 2022). In Nghe An, credit reached VND 278,706 billion, up only 2.7% compared to the end of 2022 (the increase in the same period in 2022 was 7.5%), lower than the national average of 4.73%. Notably, credit for real estate consumption in the first 5 months of 2023 decreased by 0.4%, while in the same period last year it increased by 9.5%.
In the context of declining demand for loans, the State Bank and commercial banks have implemented many measures to reduce lending interest rates and stimulate credit demand.
At BIDV Bank Nghe An branch, in addition to repeatedly reducing interest rates for new loans, interest rates for existing loans have also been reduced, especially for medium and long-term projects. This has helped customers reduce costs.
Ms. Le Thi Mong Ly - Deputy Director of BIDV Bank, Nghe An branch said: In the first 6 months of the year, the branch's outstanding loans increased by 6%, in which the corporate customer segment increased more than the individual customer segment. The reason is that in the second quarter, many businesses increased their loan sales, boosted production and business, and accelerated construction progress.
One advantage is that this quarter, customers have received great support from the bank through loan interest rate reductions; for customers who are having difficulties due to late or lack of resources to pay off their debts, the bank will help them restructure their debts and keep their debt groups intact, without being transferred to bad debt groups. However, the number of individual customers has not increased much, many customers have temporarily paid off their debts and have not borrowed again due to market difficulties.
However, the number of banks with such positive growth results is not much. The economic situation is facing many difficulties, investment demand is decreasing, capital absorption capacity of enterprises and the economy is declining, causing credit demand to decrease sharply. Explaining the reason for the credit decrease, the representative of the State Bank of Vietnam, Nghe An branch said: Some groups of small and medium enterprises and real estate customers have demand but have not met the loan conditions/or are still entangled in legal procedures.
For the group of small and medium enterprises, the capital scale is small, the equity capital and financial capacity, management and administration are limited; there is a lack of feasible business plans; information on the financial situation is still not transparent. Meanwhile, the implementation of solutions to increase access to credit through state support mechanisms (Credit Guarantee Fund for small and medium enterprises, Small and medium enterprise Development Fund...) has not been effective.
For the real estate group, the market continues to be difficult, affecting overall credit growth. In case legal problems are not resolved, credit institutions have no basis to continue disbursing according to the committed schedule. In addition, in recent times, many real estate enterprises have had high financial leverage ratios and unhealthy financial situations, leading to credit institutions having to consider the appraisal process and consider lending decisions for these enterprises.
In addition, a bank credit officer said that after a long period of economic difficulty, the risk level of customers is assessed higher, especially when it is difficult to prove the effectiveness of business operations in the current context.
Need solutions to increase capital absorption capacity
According to the General Statistics Office, the growth rate of the province's gross domestic product in the first 6 months of 2023 is estimated at 5.79%, not reaching the set scenario and lower than the same period in 2022. Production and business activities face many difficulties, especially in the industrial sector, some types of restaurant and karaoke services...; the export market is narrowing, many businesses are cutting back and lacking orders. These developments show that improving foreign demand for Vietnam's export goods may not improve soon and will need more time.
The number of newly established enterprises and registered capital decreased; the number of dissolved and temporarily suspended enterprises increased compared to the same period in 2022... The industrial production index was low and tended to increase slowly. Some key industrial products decreased compared to the same period; the operations of many factories in the fields of garment production, fiber production, footwear, phone components, wood products, mineral exploitation and processing, canned fish production... only reached about 50-70% of capacity, even had to temporarily suspend operations.
From the above situation, to improve the health of the provincial economy, thereby creating conditions for credit capital to be absorbed more easily and effectively, in the coming time, it is necessary to have strong participation from all levels and sectors in resolutely and effectively implementing the Socio-Economic Recovery and Development Program; promoting growth in sectors and fields to achieve the highest goals and plans. Sectors and levels proactively and actively review and grasp the situation of production and business activities in each sector, field and area under their responsibility to promptly detect and remove difficulties and obstacles, especially in terms of procedures, mechanisms and policies to support businesses and people; identifying this as one of the key tasks of sectors and localities; focusing on handling and resolving promptly, thoroughly and effectively outstanding and long-standing issues.
Since the beginning of the year, the State Bank has lowered interest rates four times by 0.5% - 2% for operating interest rates, which has created conditions for credit institutions to lower average VND lending interest rates to about 8.9%/year (down 1.0%/year compared to the end of 2022) and the trend will decrease further in the coming time.
To help businesses recover and develop quickly, and achieve the credit growth target set for this year, Ms. Nguyen Thi Thu Thu - Director of the State Bank of Nghe An branch said: The branch is currently directing credit institutions to review procedures and documents to increase access to credit; continue to direct reduction of lending interest rates. With existing outstanding debts, due to customers having difficulty in repaying debts, the State Bank has issued Circular 02 allowing debt restructuring and maintaining the debt group. We will continue to direct the drastic implementation of this policy to support existing outstanding debts with businesses (so far, loan restructuring has been implemented for 110 customers and is continuing to be implemented). With new outstanding debts, banks will actively lend if eligible.
Regarding the 120,000 billion VND social housing loan package, the State Bank Branch is currently actively following the Department of Construction (as the focal advisory agency) and the Provincial People's Committee to have a list of social housing projects, worker housing, renovation and reconstruction of apartment buildings in need of capital loans in the area to deploy to commercial banks for timely access, credit appraisal and granting.
In addition, it is necessary to pay attention to solutions from other agencies, ministries and sectors, such as solving output for enterprises through trade promotion, exploiting the domestic market, improving credit access conditions through guarantees for small and medium enterprises; promoting public investment to have spillover to other production and business activities.
In the real estate market, up to now, individual real estate investors and home buyers for consumption are not yet ready to invest, so credit is still low. Therefore, removing legal difficulties and adjusting house and real estate prices is also one of the solutions to promote consumer demand and investment in the real estate sector.
