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Firms fail to access credit despite new interest cap

THUrsday - 17/05/2012 09:07
HA NOI — A ceiling lending interest rate of 15 per cent was officially applied for four prioritized sectors yesterday as the State Bank of Viet Nam's Circular 14/ 2012/TT-NHNN came into effect, but industry insiders said conditions remained difficult for firms to approach bank loans.

Firms-fail-to-access-credit-despite-new-interest-cap

Last Friday, drawing up the lowest lending rate for short-term loans in dong presently on the market with the aim to stimulate production and business activities in export, support industries, agriculture and rural areas, and small- and medium-sized enterprises.

 

It said the move was to help maintain economic growth at a reasonable level, in addition to assisting businesses and people to reduce financial costs.

"I think this policy, by giving such an interest rate, will help qualified enterprises access credit more easily," Maritime Bank deputy general director Tran Xuan Quang said, adding that the bank would offer the rate to clients it defined as "healthy and transparent".

He said this would force firms to make greater efforts to meet the transparency criteria of banks, which in turn would improve general economic information.

"Companies which can manage the preferential loans can also generate a domino effect [on other sectors], and this will be an advantage for capital circulation," he added.

Eximbank general director Truong Van Phuoc told Thoi bao Kinh te Viet Nam (Vietnam Economic Times) this was a timely move suitable to developments on the capital market, but the issue was that banks were now hesitate to lend money due to too many risks.

He said it was extremely uncertain whether enterprises could pay debts on time in the current context, and many banks were pouring money into the inter-bank market or treasury bills despite insignificant interest rates below 5 per cent and around 10 per cent, respectively, in these areas.

"Not all enterprises in the prioritized sectors will be lent as banks now consider [lending] very carefully to avoid bad debts," said a deputy general director of a bank in HCM City, who admitted that banks were facing great challenges themselves in assuring profits this year.

"Therefore, many firms will continue to fail to borrow despite the newly-stipulated lending rate," he said.

A recent Asia Commercial Bank (ACB)'s survey showed that 30-35 per cent of small- and medium-sized enterprises could access bank loans, 30 per cent found it hard to approach capital, and 30 per cent couldn't manage borrowing.

About 36 per cent said they met difficulties related to high interest rates, while 70 per cent said they faced challenges related to procedures.

ACB's general director Ly Xuan Hai urged companies to concentrate on their core business, offer transparent financial reports and work out long-term strategies so as to qualify for loans.

Phuoc said whether firms truly wanted to borrow money now was also a question, as even if they could borrow, it would be hard for them to use the money effectively in a declining consumer market.

Many companies were showing little interest in Eximbank's lending packages despite preferential interest rates of 13.5-15 per cent, he said, noting that any interest cuts would take true effect only if firms were assisted with such measures as tax reduction and the consumer market recovered.

A deputy director of another HCM City-based bank suggested interest rates for consumer lending should also be reduced to 15 per cent to encourage purchasing power on the market.

Ban Viet Securities Co analysts said they expected the new State Bank's policy to have an insignificant impact on exports as many exporters were borrowing US dollar instead of dong.

A deputy director of another HCM City-based bank suggested interest rates for consumer lending should also be reduced to 15 per cent to encourage purchasing power on the market.he text heretext here

Source: Vietnamnews

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