FIEs feel tired of the procedures for accessing bank loans
FIEs feel tired of the procedures for accessing bank loans
Foreign invested enterprises (FIEs) complain that it’s very difficult to borrow money from Vietnamese banks, which always require complicated procedures.
Ajay Bhagat, Director of Dutchply Industry Company, said at the investment and finance & banking forum held in Hanoi some days ago--that the biggest problem of most of the FIEs in Vietnam is the inability to access bank loans.
According to the director, in order to be able to borrow one dong from Vietnamese banks, foreign companies have to have the capital equal to 150 percent of the amount – the thing that most of the projects cannot satisfy on the first days of the project implementation.
Every commercial bank requires some specific kinds of documents. Especially, they only care about the assets to mortgage for the loans instead of considering the feasibility of the investment projects. The difficulties in accessing bank loans have made the Vietnamese business environment less attractive in the eyes of foreign investors.
“Do you have assets to mortgage for the loans?” is the question commercial banks always raise. Meanwhile, factories and equipments do not have any significance to them,” he said, adding that the only way to borrow money from banks is to have assets to mortgage.
However, another investor said, even if enterprises have assets to mortgage for the loans, they would be able to borrow the sums of capital equal to 65 percent of the values of the mortgaged assets.
Explaining this, commercial banks said they need to apply necessary measures to ensure the safety for the loans. The majority of the collateral are properties, while the real estate market has been gloomy and banks should anticipate the real estate price decreases, which would make the collateral less valuable.
The said director has also pointed out some other problems which he called the big barriers for FIEs, including the language barrier and the inconsistent policies. Especially, he said commercial banks still have not accepted the L/C payment, even though the mode has become very popular in the region and the world.
In the context of the economic downturn, where the purchasing power is very weak, it would be very risky to accept to borrow money at the high interest rates of up to 23 percent in Vietnam for medium term loans in 2011 and 15 percent at present.
However, even if accepting the high risks and the high interest rates, enterprises would still not be able to access bank loans. The banks may say “no” to the enterprises, even though they have gone through a lot of necessary procedures and have mortgaged assets inspected by the banks.
Especially, the discount rates required in Vietnam prove to be far higher than that in other developing economies.
“Therefore, it would be especially difficult for the investors who start their investment in Vietnam, because they would find it very difficult to obtain loans,” the director said. “Commercial banks would only accept properties as the collateral for the loans, while they would refuse the factories or equipments to be generated during the investment process.”
Dr Dang Dinh Thien, Head of the Vietnam Economics Institute, has also confirmed that it’s very difficult to access bank loans, adding that this is the common problem of all enterprises, no matter they are foreign invested or 100 percent Vietnamese owned ones.
Bui Xuan Hai, Director of Hai Do Co Company, said the credit flow has got stuck. Commercial banks set high requirements to be sure that they can recover the capital. Meanwhile, businesses cannot meet just 1/5 of the requirements of banks to be eligible for borrowing money
vietnamnet
