16:38 | 18/03/2015 Finance - Banking
(VEN) - Creating links between banks and enterprises is one of the major programs being initiated by the banking system in 2015, particularly in Ho Chi Minh City. The plan is aimed at resolving difficulties for business seeking loans, as well as streamlining activities between banks and businesses, and ensuring sufficient capital for production and trade. Generally, this program is meant to enhance firms’ competitiveness, reduce production costs, and promote production and trade.
Considering a reduction in lending interest rates
The bank-enterprise connection program was developed strongly in Ho Chi Minh City in 2014 as 22 banks concluded 31 agreements to provide VND40.057 trillion worth of loans for 1,143 businesses, a two-fold increase from the set target. In addition, eight credit institutions provided VND8.3 trillion in loans, accounting for 5.5-6 percent of the short-term, and 7-10 percent of medium-term loans for 68 businesses to help them overcome difficulties. Asides from the loans, businesses also received debt restructuring advice, reduced interest rates, and support to effectively manage their loans.
Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien said that following the successful provision of capital for businesses in Ho Chi Minh City, the banking system has launched the bank-enterprise connection program nationwide and has drawn-up specific solutions for each locality to directly support borrowers, focusing on medium to small-sized enterprises in particular.
By the end of 2014, the program had provided VND250 trillion for businesses, and the State Bank had organized more than 300 meetings with businesses to resolve their difficulties.
For the year ahead, the program has earmarked VND60 trillion for businesses in Ho Chi Minh City, plus a variety of preferential loans to help them stabilize and expand production and trade, as well as increase competitiveness.
Deputy Governor Tien said that apart from loans for businesses in priority areas , the State Bank will boost loans for businesses in the hi-tech and support industries, while expanding the number of medium to long-term borrowers, thus allowing them to renew their technology and expand production. Regarding loan interest rates, Tien said that as long as the money market remains stable and safe the banking system will continue to grow, and with inflation pegged at a low rate, credit institutions will consider further reducing interest rates to be commensurate with the real situation at enterprises.
Many commercial banks have pledged to provide loans under the bank-enterprise connection program for 2015. VietinBank Deputy General Director Nguyen Hoang Dung said that his bank would earmark VND40 trillion for the program and look to reduce the bank’s medium to long-term interest rates by 1-2 percent. To further support businesses, Dung added that commercial banks should combine their strength and determination to successfully implement the program.
Unfortunately, the bank-enterprise connection program is hampered by a number of problems. According to Deputy Director of the State Bank’s Ho Chi Minh City Branch, Nguyen Hoang Minh, a large number of businesses have sound business plans but do not have mortgage assets, and as such have no collateral to obtain a loan from banks. To improve the situation, it is necessary to expand the program to attract eligible businesses. He also suggested that commercial banks offer a limited amount of loans to businesses without mortgage assets following the provision of a credit mechanism.
Also, in Ho Chi Minh City and elsewhere, localities need to establish funds to underwrite credit for medium to small-sized enterprises, thus allowing preferential loans for businesses that normally cannot obtain credit from commercial banks. In cases where businesses do not have mortgage assets, they should be permitted to mortgage their money flows meaning that commercial banks would check their financial health based on their debt management before deciding whether or not to provide them with a loan.
Nguyen Hoang Minh also said that the Ho Chi Minh City Branch of the State Bank has set up a hotline to resolve difficulties for businesses seeking preferential loans.
By Duy Minh