Surge in bank credit for prioritized areas

15:31 | 20/07/2018 Economy

(VEN) - Despite slower growth compared with the same period last year, credit grew steadily in the first five months of 2018. A State Bank of Vietnam (SBV) representative indicated positive changes in credit for prioritized areas. Commercial banks are boosting capital supply for the economy to meet business demand towards year’s end.

surge in bank credit for prioritized areas

According to Pham Thanh Ha, Director of the SBV’s Monetary Policy Department, by May 31, 2018 credit grew 6.16 percent compared with the end of 2017. This was a lower growth rate compared with 6.9 percent of the first five months last year. A National Financial Supervisory Commission report shows that in the first five months of this year, credit in VND increased by an estimated 5.6 percent and accounted for 91.9 percent of the total. At the same time, credit in foreign currency grew eight percent but accounted for a mere 8.1 percent; medium and long-term credit growth slightly decreased compared with the same period last year and grew about 5.4 percent.

Commercial banks have concentrated on providing loans for manufacturing businesses in prioritized sectors to promote economic growth. By the end of May 2018, the balance of credit for businesses in the agro-forestry-fishery sector grew an estimated 6.8 percent compared with late 2017; the balance of credit for the industry-construction sector grew 6.83 percent and for the trade-service sector 5.7 percent. Nguyen Van Tan, Deputy Director of the SBV’s Credit Department affirmed that credit had been increased for prioritized areas. Specifically, credit for agriculture and rural development grew 5.8 percent; credit for export production was up 15.64 percent; credit for high-tech businesses increased by 6.29 percent; for support industries, up 5.42 percent; and for small and medium enterprises (SMEs), up 2.61 percent.

Banks-business dialogue

In the first half of 2018, SBV’s branches in cities and provinces nationwide coordinated with local governments to organize more than 300 meetings and dialogues between commercial banks and businesses. Through these activities, banks disbursed over VND210 trillion of loans for more than 20,000 companies and other customers; extended the time for debt payment and reduced lending interest on loans to nearly 1,900 companies and 600 other customers, helping them overcome difficulties to promote production.

To achieve the 17 percent credit growth target set for 2018, in the third and fourth quarters the SBV will continue controlling and adjusting the size of credit loans in a flexible manner. Commercial banks are increasing loans with preferential interest rates for various types of customers to meet high business demand towards year’s end.

The Southeast Asia Joint Stock Commercial Bank (SeABank), for example, is willing to provide loans amounting to 90 percent of the value of properties mortgaged by plastics and resins companies. The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) currently applies lending interest rates ranging from 6-6.5 percent per year on business loans, and allows borrowers to pledge company products as collateral for the loans. The Nam A Commercial Joint Stock Bank has set aside VND2.5 trillion to provide short-term loans at an interest rate of 6.88 percent per year. A representative of the Vietnam Maritime Commercial Joint Stock Bank said the bank had set aside a credit package worth VND10 trillion to provide loans at an annual interest rate of 6.99 percent for new customers, focusing on micro, small and medium-sized enterprises. With this package, Maritime Bank is willing to provide businesses with loans that triple the value of mortgaged assets.

From now until year’s end, the Saigon-Hanoi Commercial Joint Stock Bank (SHB) will implement a credit program worth VND4 trillion to provide individual customers with loans for use in production and trade. Under this program, SHB will offer customers a preferential interest rate of 9.2 percent for one year. After that, the interest rate will be adjusted by a maximum of 2.9 percent per year. Customers will also be offered other preferences related to card or other products/services of the bank.

SME support

The prime minister recently issued Instruction 15/CT-TTg to promote effective implementation of the Law on Support for Small and Medium Enterprises. The SBV is responsible for coordinating with ministries, sectors and localities to implement related tasks. The prime minister has also assigned the central bank to assist credit institutions in increasing loans for SMEs.

The SBV will coordinate with ministries, sectors and the people’s committees of centrally governed cities and provinces to provide guidance for credit institutions to take the initiative in designing credit programs/packages at reasonable interest rates for SMEs. It will also work with the Ministry of Finance to provide interest subsidies for loans used to finance startups by SMEs and their participation in value chains. The SBV will coordinate with the Ministry of Planning and Investment and other authorities to build an information system catering for SME credit rating.

Pham Thanh Ha, Director of the SBV’s Monetary Policy Department:

From now until the end of 2018, the SBV will continue applying flexible monetary policies, while at the same time

enhancing the quality of credit and assisting credit institutions in increasing loans for prioritized areas. The central

bank will also tighten control over credit for risky areas and create favorable conditions for businesses and individuals

to access loans.

Duy Minh