Businesses continue to seek cheaper financing as lending rates remain high

Businesses continue to seek cheaper financing as lending rates remain high

Business representatives said high interest rates are not only increasing financing costs, but also discouraging investment, particularly among small and medium-sized enterprises (SMEs), which account for more than 98 per cent of all businesses in Việt Nam.

A customer conducts a transaction at Vietcombank. — VNA/VNS Photo

 Vietnamese businesses have said borrowing costs remain high despite repeated calls by the Government and the State Bank of Vietnam (SBV) for commercial banks to lower lending rates to support economic recovery and business expansion.

Business representatives say high interest rates are not only increasing financing costs, but also discouraging investment, particularly among small and medium-sized enterprises (SMEs), which account for more than 98 per cent of all businesses in Việt Nam.

Both the central Government and HCM City authorities had repeatedly urged banks to reduce lending rates, said chairman of the Saigon Northwest Business Association Lê Tấn Nam.

However, feedback gathered through business dialogues and meetings with the SBV and commercial banks suggested that most enterprises had yet to see any meaningful improvement, he noted.

Many businesses were still paying relatively high lending rates, making production and business operations more difficult, Nam said.

He noted that while SMEs make up the overwhelming majority of businesses, a significant share of bank credit had been channelled to large corporations implementing key national projects, making it harder for smaller firms to access affordable financing.

Nam called on the central bank and commercial lenders to introduce measures to lower lending rates and expand access to preferential loans, so businesses can step up investment in the second half of the year.

Vice Chairman of the HCM City Construction Science and Technology Association Dương Kim Quân agreed, saying the Government's policy of lowering interest rates was positive, but had yet to translate into lower borrowing costs for many businesses.

According to Quân, some companies have faced lending rates as high as 14–15 per cent per year, putting significant pressure on cash flow and investment efficiency. He urged banks to expand medium- and long-term lending programmes with more reasonable interest rates.

Export-oriented manufacturers faced particular financing challenges because of their long working capital cycles, said Phùng Quốc Mẫn, chairman of the Handicraft and Wood Industry Association of HCM City. Wood and furniture producers must finance raw materials, production and operating costs long before export revenues are received, requiring significant working capital.

Mẫn called for more suitable credit policies for exporters with confirmed orders, stable cash flows and good compliance records.

Businesses also warn that high deposit rates could weaken investment incentives by encouraging households and entrepreneurs to keep their money in banks instead of investing in production.

Trần Việt Anh, general director of Nam Thái Sơn Import Export JSC, said that if deposit rates remain close to 10 per cent, many business owners would question whether investing in production is worthwhile.

"When deposit rates are close to 10 per cent, many small businesses will prefer saving rather than expanding production," he said, noting that profit margins in many manufacturing industries are only around 15 per cent, leaving little return after accounting for business risks.

A representative of a packaging printing company agreed, saying high interest rates both increased borrowing costs and undermined businesses' willingness to invest.

Business representatives say lowering lending rates, expanding preferential credit programmes for SMEs and developing more medium- and long-term financing packages will be essential to strengthening the private sector's role as a driver of economic growth.

For its part, SBV has repeatedly instructed commercial banks to lower lending rates to support economic growth. At a recent conference reviewing the banking sector's first-half performance, SBV Governor Phạm Đức Ấn reaffirmed that monetary policy would continue to balance inflation control with growth objectives, while calling on banks to cut operating costs to create more room for lower lending rates.

He also urged lenders to diversify credit products and improve access to financing, particularly for SMEs. The SBV aims for credit growth of around 15 per cent this year, and said it would use monetary policy tools flexibly to ensure adequate liquidity across the banking system when needed.

The latest directive builds on a series of earlier measures requiring commercial banks to stabilise deposit rates, lower lending rates where possible and improve transparency in loan pricing. 

In April, banks agreed to reduce both deposit and lending rates following a meeting chaired by the governor. Since May, the SBV has also stepped up inspections to ensure lenders comply with its interest rate directives, signalling a shift from issuing policy guidance to ensuring implementation. 

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