Banks seek attraction of small traders for loans
Banks seek attraction of small traders for loans
Unable to offer more loans to businesses with unsettled bad debts, many banks in Ho Chi Minh City are switching into luring small traders at markets citywide to explore a customer segment they have long abandoned.
The most remarkable difference between corporate and trader borrowers is that loans for the latter are often of small value, ranging from VND5 million to VND10 million.
This is a prime time for banks to offer loans to traders, who need money to stockpile goods to embrace the coming Tet market, which will begin early next year.
The lenders also offer flexible payment methods to attract small vendors, who are not used to applying for bank loans.
“Small traders are hesitant because they only wish to borrow small loans and are unfamiliar with modern premises like bank offices,” explained Tran Ngoc Tam, deputy CEO of Nam A Bank.
Tam said interest rates for this type of lending range from 13 – 13.5 percent a year, and borrowers can choose to either gradually complete payments or settle the loan when the term is due.
Sacombank said it is offering VND1 trillion worth of loans for small traders at markets citywide who want to stockpile goods for Tet.
Each trader is allowed to borrow up to VND500 million, and can complete payments by day, week, or month.
Le Hung Dung, chairman of Eximbank, said most banks are hesitant to offer new loans for businesses who have yet to settle their bad debts, fearing it will only make them increase.
At a recent meeting between the State Bank of Vietnam and the group consisting of 14 major banks, a bank chairman said it is impossible to continue offering loans to the bad debtors.
“What if businesses use the new loan to repay debts of other creditors instead of focusing on revitalizing their production?” Dung quoted the chairman as saying at the meeting.
Dung said banks are assigned with the impossible task of increasing credit growth while restraining bad debts from growing.
A banking expert said it is easy to understand the bank’s reluctance.
“Borrowers hope that new money can save old debt, but unfortunately they can end up losing both,” he said.
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