New IP financing trend could help SMEs access credit, grow
New IP financing trend could help SMEs access credit, grow
An international symposium encouraged Vietnamese banks to provide loans using intellectual property (IP) assets as collateral to small- and medium-d enterprises (SMEs).
This strategy aims to improve the sector's access to credit, and boost innovation and growth. It was discussed at an international symposium on intellectual property financing held yesterday in Ha Noi by the International Finance Corporation, the private sector lending arm of the World Bank Group.
According to Professor Xuan-Thao Nguyen, Gerald L Bepko endowed chair in law and an IFC secured transactions specialist, this form of lending wasn't new in the world. It was developed more than a hundred years ago in the US and is growing fast in China, Thailand and Malaysia.
Nguyen said IP financing reached US$34 to 50 billion in 2014 in China and was expected to grow faster this year. Thailand and Malaysia also created regulations on IP financing.
"SMEs are the ones that mainly create disruptive technology," she said. "They have new ideas and need banks to provide financing to help them participate in the knowledge-based economy."
According to a report by the Viet Nam Chamber of Commerce and Industry, SMEs accounted for more than 97 per cent of Viet Nam's businesses, but only 30 per cent of them could access credit from banks. The other 70 per cent needed to use their own capital or borrow from other sources at high costs.
Tran Thi Hong Hanh, general secretary of the Vietnam Banks' Association, said IP financing would play an important role in banks' lending activities, and had untapped potential for development in Viet Nam.
Hanh said the slowdown in the real estate market, accompanied by legal problems in dealing with property assets as collateral, caused difficulties for banks when choosing such collateral for loans.
"In Viet Nam, there is not much IP financing at commercial banks now, but the development of this form would help SMEs and thereby support national economic growth," Hanh said.
Vietnamese management authorities had shown interest in the trend and would build legal framework to facilitate its development, she said.
Nguyen said IP financing could help Vietnamese banks survive and compete with others. They could learn from the example set by the international community, which has more experience with the trend than Viet Nam does.
"Banks and lenders must understand IP law or hire experts to help them understand IP law," Nguyen said. "They also must conduct careful due diligence to learn about clients' businesses to make valuations."
She said Viet Nam's law-making authority should encourage IP financing, and improve regulations on foreclosure of assets – including IP assets.
"If we don't have a system that clearly allows banks and lenders to quickly foreclose collaterals, including IP assets, and allow them to sell those assets, banks will not be willing to lend," she said.
According to Charles Schmal, a Woodard Emhardt Moriarty Mc Nett and Henry LLP partner, most IP assets were valuable. He suggested new businesses think about IP rights at an early stage, and use them to persuade banks to give them loans.
