International institutions ease SME credit crunch

13:47 | 22/05/2019 Finance - Banking

(VEN) - Small and medium enterprises (SMEs) account for 98 percent of all businesses in Vietnam, and about 60 percent of them are facing capital shortages because they cannot obtain loans from banks and investment funds. Helping them access funding is important in order to allow them to bring their potential into play.

international institutions ease sme credit crunch
Small and medium enterprises need preferential credit

According to the Vietnam Chamber of Commerce and Industry (VCCI), only one to two of every 10 SMEs have capital of more than VND10 billion, preventing most from expanding their business and investing in long-term strategies and technology development.

The International Finance Corporation (IFC) recently offered a loan worth US$100 million to the Orient Commercial Joint Stock Bank (OCB) to facilitate the bank’s financial assistance for SMEs, especially ones owned or managed by women, and increase credit for supply chains in Vietnam. In 2018, IFC provided a credit package worth US$100 million to OCB, US$57 million to VPBank and US$100 million to TPBank, which all offered development opportunities for SMEs.

OCB General Director Nguyen Dinh Tung said with IFC’s credit, the bank pledged to increase loans for SMEs, helping them develop and improve business performance in the context of an increasingly competitive environment.

IFC Senior Country Manager for Vietnam, Laos and Cambodia Kyle F.Kelhofer said IFC has been providing financial assistance in Mongolia, the Philippines, Laos, and China, and will promote credit for SMEs in Vietnam. Since 1990, IFC has been providing credit for promoting Vietnamese SMEs’ exports, Kyle F.Kelhofer said.

The Swiss State Secretariat for Economic Affairs (SECO) is working with some banks in Vietnam to develop supply chain finance (SCF) in order to help SMEs. SCF is a set of technology-based business and financing processes that link the various parties in a transaction - buyer, seller, and financing institution - in order to lower financing costs and improve business efficiency. SCF provides short-term credit that optimizes working capital for both the buyer and the seller.

However, to promote this linkage, it is very important for the government to issue policies for attracting investment in production, processing and distribution as part of domestic and global supply chains. It is also important to have specific regulations and guidelines to create a legal framework for banks and organizations from different economic sectors to join SCF.

VCCI Vice Chairman Vo Tan Thanh said small businesses own only 20-30 percent of their companies’ capital, with

the remaining 70-80 percent raised through connectivity with their friends, family members and other relatives. This is

why small businesses cannot bring their potential into full play.

Ngoc Thao