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Wednesday, July 24, 2024

75% of small firms fail to access formal loans

The Saigon Times

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HCMC – A mere 25% of small and medium enterprises (SMEs) have gained access to formal credit, while many others are struggling with their poor financial situation.

The remaining 75% of SMEs are receiving loans from friends, families or non-bank lenders, according to Bui Thu Thuy, deputy head of the Enterprise Development Agency under the Ministry of Planning and Investment.

Thuy was speaking about access to loans during a workshop on July 26.

Many businesses’ low financial capacities, which are reflected through cash flow management, transparency in documents and financial reporting, have hindered them from accessing formal loans.

Some factors related to collateral, business feasibility, debt payment and procedures have also prevented small businesses from securing loans.

Therefore, a shortage of capital has impeded enterprises’ digital transformation plans. Meanwhile, access to loans and digital transformation are considered two key factors helping small firms recover and grow after the pandemic.

The United States Agency for International Development has launched numerous programs to help small firms gain access to loans and advance with digital transformation.

Some 500 SMEs have been offered in-depth consulting services for access to loans. Of these, 14 firms received loans worth a total US$5 million.

Additionally, documents on digital transformation have been delivered to 400,000 firms.

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