Capital solution for support industries

14:45 | 10/06/2016 Industry

(VEN) - Due to limited capital resources, domestic support industry businesses are unable to compete with foreign invested companies and have sometimes missed out on opportunities to join global supply chains. In this context, the State Bank of Vietnam (SBV) has issued Circular 01/2016/TT-NHNN guiding the provision of loans for support industry businesses.

Capital solution for support industries

Vietnamese support industries have revealed weaknesses including a lack of capital and technology, limited state investment, and poor technical capabilities. Due to these weaknesses, some businesses have curbed their manufacturing.

To help support industry businesses overcome their difficulties, the SBV has launched a preferential loan package that offers businesses 50-100 percent subsidized interest rates on the prime lending rate, allowing them to borrow up to a total VND100 billion. However, the number of businesses accessing this capital source remains modest.

To further help businesses, the SBV in early February issued Circular 01/2016/TT-NHNN guiding the provision of loans for support industry businesses in accordance with Governmental Decree 111/2015/ND-CP dated November 3, 2015 regarding the development of support industries. The circular is applied to credit institutions and branches of foreign banks providing loans for projects aimed at manufacturing prioritized support industry-related products.

Under the circular, when they borrow loans from credit institutions based on the guarantee of credit guarantee organizations to invest in manufacturing prioritized support industry-related products, small and medium-sized businesses will be subject to interest rates applied to short-term loans in Vietnamese dong, which will not exceed the maximum lending rates offered by credit institutions and branches of foreign banks to customers from certain economic sectors and fields specified by the SBV governor.

These businesses will be allowed to borrow a maximum of 70 percent of their capital needs if they meet the following conditions: 1) total value of assets used as collateral at credit institutions is equal to at least 15 percent of the loan amount; 2) contributing at least 20 percent of their equity to projects they participate in; and 3) having no outstanding debt related to unpaid taxes or bad debt with credit institutions or other economic organizations at the time of requesting for credit.

Loan agreements which were signed before the circular took effect (February 22, 2016) will continue to be implemented until their expiry dates. Credit institutions and branches of foreign banks will consider and decide to provide loans for prioritized support industry-related product manufacturing projects, and be responsible for their lending decisions. 

 

Hong Duong

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