Banks reach out to small firms, but encounter lack of transparency

11:00 | 07/09/2018 Finance - Banking

(VEN) - Lack of mortgage assets and financial transparency make it hard for small and medium-sized enterprises (SMEs) to get loans and develop.

banks reach out to small firms but encounter lack of transparency

Speaking at a recent seminar entitled “Where can small firms find capital?”, Nguyen Hoang Minh, deputy director of the State Bank of Vietnam’s Ho Chi Minh City Office, said the SBV and commercial banks have made efforts to help small and medium-sized enterprises (SMEs) get loans. Since 2012, more than 50,000 SMEs have borrowed more than VND900 trillion (US$38.7 billion), he said.

However, he conceded that SMEs lack assets to pledge, among other hurdles they face in getting credit. To resolve this problem, the SBV has worked with banks to allow small firms without assets to use their cash flow as collateral, Minh said. He also pointed out that one of the main obstacles to SMEs getting loans is the lack of transparency in their financial statements. “Many small firms are usually household businesses and do not have a chief accountant professionally taking care of financial matters.”

He said some businesses even use two sets of books to evade tax, which also makes banks reluctant to lend to them. “Only when banks can learn about firms’ business performance through transparent audited financial statements can the two go with each other over the long term,” Minh said.

Ha Bich Phuong, deputy director of the Corporate Client Division at the Saigon Commercial Bank (SCB), said the SCB is keen on working with SMEs and those specializing in the high-tech agriculture and service sectors. The bank offers loans with simple procedures and preferred annual lending rates of 6.5 percent for firms in the priority sectors and eight percent for others.

Apart from bank loans, small businesses can also apply for financial assistance from the city’s Credit Guarantee Fund for SMEs, according to Do Tan Truc, head of the SMEs support department under the fund. Through these programs, businesses can get loans from banks with their interest fully subsidized or with 50 percent subsidies, he added.

By July 2018, total outstanding loans in Ho Chi Minh City reached more than VND1,912 trillion, an increase of 16.73

percent compared to the same month last year and 8.59 percent compared to the end of 2017.

Thao Ngoc