Capital the biggest challenge for SMEs
Capital the biggest challenge for SMEs
Vietnamese small- and medium-sized enterprises (SMEs) will face challenges to raise capital as the country integrates more into the global economy.
"Only 31 per cent of SMEs can now borrow loans from banks, even though they make up 95 per cent of companies and contribute 40 – 50 per cent of GDP," Dr. Cao Sy Kiem, chairman of Viet Nam Small- and Medium-Sized Enterprises Association was quoted as saying in the Sai Gon Giai Phong (Liberated Sai Gon) newspaper.
According to a report from the Bank for Investment and Development of Viet Nam (BIDV), half of its customers are SMEs, but one-third receive loans because of their poor financial capability, management skills, outdated technology and limited market.
Most of the SMEs do not have much capital and have to borrow medium- and long-term loans. Banks do not want to let SMEs borrow because of the high risk.
"When Viet Nam deeply integrates into the global economy, local SMEs will face more challenges because of limited finance and poor financial management that restricts them from mobilising capital through issuing shares," Kiem added.
In addition, if SMEs lean on bank capital, they cannot compete because of the high interest rate of 7 – 8 per cent per year, while in other countries, enterprises must pay only 1-2 per cent per year.
"In international integration, SMEs must consider their weak and strong points to spur their own development and increase competitiveness," he added.
Many enterprises and experts have asked the Government to create a legal framework for SMEs so they can benefit from technology transfer; set non-tax technical barriers to ensure low-quality products do not enter the country and do not compete with local enterprises.
Samsung has sent a request to the government to give support to their satellite enterprises so they can produce products in the support industry. Few local enterprises can meet Samsung's demand for such products.
"In this context, SMEs can't seek their own way to develop, without support from the Government and related authorities," Kiem added.
