Firms thirsty for capital despite banks’ spare cash
Firms thirsty for capital despite banks’ spare cash
Many banks have claimed they do not lack funds to meet corporate demand for loans, though enterprises are complaining of difficulties in accessing credits.
Speaking at a conference held in Can Tho City on August 29, Nguyen Quoc Hung, director of the Credit Department of the State Bank of Vietnam (SBV), noted that in the Mekong Delta region, the credit scale in the first seven months of the year amounted to VND623.9 trillion, up 7.76% against the figure seen in late 2018.
Of the total, the credit for the agricultural and rural sector rose by 14.8%.
Hung noted that over the first two quarters of 2019, credit organizations had disbursed some VND71.3 trillion to 4,400 firms.
“Besides this, banks’ debt restructuring activities such as reducing interest rates for loans and increasing lending caps had supported over 250 firms with outstanding loans totaling VND3.7 trillion,” he said.
However, loans offered to firms operating in value chains and those applying advanced technology to their production processes remained limited due to the ineffectiveness of their businesses. In addition, many firms failed to show sound financial capacity, discouraging banks from providing loans.
“Many small and medium enterprises (SMEs) have yet to meet loan requirements,” Hung explained.
Hung told The Saigon Times on the sidelines of the conference “Connecting Banks and Enterprises in the Mekong Delta” that in principle, banks with abundant capital sources must look for enterprises that boast strong performance to offer them loans. Banks create more favorable conditions for even SMEs to get loans.
“However, some firms with weak financial capacity have still found it hard to access bank loans as they fail to meet banks’ requirements,” he said.
A representative of HCMC Development Joint Stock Commercial Bank (HD Bank) noted that between January and July, its credit growth was recorded at 17% against 2018.
Banks are more cautious about offering loans to agricultural firms as lending is associated with high risks, customers are often unable to make loan payments due to natural disasters and diseases and the outlet of farm produce depends heavily on the Chinese market, the HD Bank representative stated.
The selling prices of agricultural products and their quality are unstable, resulting in reluctance among banks to offer these firms loans.
In addition, a representative of Asia Commercial Bank pointed out that banks prefer to offer loans to firms with collateral.
“However, enterprises’ land and premises are often rented from others for a certain term, so when they use the land and premises as collateral, banks can only appraise their value for the period of the lease, leading to inaccuracy in valuation compared with the market price,” the representative remarked.
Firms’ financial reports are also used by banks to assess their business performance before loans are offered, the representative said.
Addressing the conference, Doan Huynh Dung, chairman of Kien Giang Import & Export JSC, active in the rice field, noted that each year, the firm buys and sells some 270,000 and 300,000 tons of rice, respectively.
It needs over VND1.3 trillion per year on average, with loans reaching VND1 trillion, for its business operations.
The chairman, however, stated that the firm is still facing difficulties in accessing loans due to high interest rates and strict requirements set by banks, so he called for support from the authorities and credit organizations.
Vo Quan Huy, director of Huy Long An Company, suggested it was necessary to change the way property is appraised.
He proposed determining the value of property according to the land price in provinces to make it easy for firms to use property as collateral to get higher loan amounts from banks.
Meanwhile, the chairman of Kien Giang Import & Export JSC proposed that credit institutions be more flexible with their lending requirements.
“Banks should learn about the difficulties and challenges facing firms, as well as their potential for financial capacity and trust in firms’ development,” he remarked.
SBV Deputy Governor Dao Minh Tu stressed that commercial banks should reform administrative procedures and correctly appraise firms’ property, used as collateral.
Tu added that credit institutions should continue removing bottlenecks to help SMEs access loans.
