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SMEs face multiple challenges in obtaining bank loans
By Minh Tam
Wednesday,  Jul 18, 2018,19:20 (GMT+7)

SMEs face multiple challenges in obtaining bank loans

By Minh Tam

Dang Duc Huy, director of the Retail Banking Division at Saigon Commercial Bank, speaks at a seminar in HCMC today, July 18 - PHOTO: THANH HOA

HCMC – Despite numerous preferential policies offered by banks in HCMC intended to attract borrowers, small and medium enterprises (SMEs), which are in dire need of capital, still face difficulties in accessing bank loans, according to speakers at a seminar in HCMC today, July 18.

At the seminar, titled “Where can small enterprises borrow low-interest loans?”, jointly held by The Saigon Times and Saigon Commercial Bank (SCB), Nguyen Hoang Minh, deputy director of the HCMC branch of State Bank of Vietnam, noted that banks have offered multiple incentives on credit, interest rates and exchange rates to support SMEs, which make up 97% of the total firms in Vietnam.

Banks have prioritized pumping capital into production and business activities, he added. Enterprises in rural areas, SMEs and exporting and supporting industries as well as hi-tech firms will be provided loans with preferential interest rates.

In addition, the city has launched many programs to connect enterprises with commercial banks, apply preferential policies on interest rates and support enterprises in completing administrative procedures.

However, many enterprises have found it difficult to access bank loans or are subject to high lending rates. They cannot take out bank loans as they do not have sufficient assets as mortgage or have problems with their financial dossiers.

According to representatives of some local enterprises participating in the seminar, they have faced difficulties in making their financial reports transparent and have even suffered harassment from banking officers.

Although two-thirds of the procedures for borrowing capital from banks have been abolished compared to three years ago, the procedures remain complicated nonetheless, as banks want to protect themselves from risks, Minh added.

In an ongoing program to build links between banks and enterprises, the interest rates for medium- and long-term loans will be kept unchanged in the first year or two and will be renegotiated later. In reality, banks have encountered many difficulties in the past in mobilizing time deposits to make medium- or long-term loans. In fact, up to 79% of mobilized funds at banks are call deposits.

Dang Duc Huy, director of the Retail Banking Division at SCB, quoted an international consulting organization as saying that SMEs were facing four major problems while accessing banks loans: a lack of mortgaged assets, complex lending procedures, opaque financial reports and short operation periods.

Vu Thi My Linh, a financial expert, asserted that banks have always wanted to cooperate with enterprises and that firms also needed to borrow capital from banks. However, many enterprises have yet to satisfy banks’ requirements.

Each bank has its own regulations and priority clients, so enterprises should find the bank most appropriate for them. Meanwhile, banks should continue to improve their services, reform transaction models and standardize procedures to support enterprises, Minh of the central bank added.

SCB is keen on working with SMEs and those specializing in the hi-tech agriculture and service sectors. The bank offers loans with simple procedures and preferable annual lending rates of 6.5% for enterprises in the priority sectors and 8% for others, stated Ha Bich Phuong, deputy director of the Corporate Client Division at SCB.

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