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Friday, June 21, 2024

Borrowing turns harder as interest rates rise

By Dung Nguyen

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HCMC – Businesses find it tough to gain access to bank loans as interest rates are increasing.

Speaking at a conference held yesterday (August 31), Ly Kim Chi, chair of the Food and Foodstuff Association of HCMC (FFA), said enterprises are in dire need of capital to buy raw materials.

This year has seen raw material prices soaring over 20%, thereby increasing producers’ capital expenditures, estimated to rise 50% to 60%.

As almost 97% of companies in the food industry are small- and medium-sized, they have to seek financial sources and collateral for bank loans, “but banks have used up their credit growth quotas,” she said.

Responding to Chi, Vo Minh Tuan, director of the State Bank of Vietnam’s branch in HCMC, said during the meeting that raising credit growth quotas for banks would make it easier for corporate clients to borrow.

“Some VND450 trillion would be allocated to banks,” he said, adding that banks had their ways to determine how much they would lend, depending on clients’ options and the feasibility of their business plans.

Banks’ corporate clients do not complain much about higher interest rates, but they are concerned over being unable to take out a loan, said Pham Ngoc Hung, vice chair of the HCMC Union of Business Associations.

The general director of an HCMC-based commercial bank said a client preferred applying for a standard corporate loan over taking out a loan under the interest subsidy package due to sluggishness in paperwork and disbursement.

Banks in August adjusted lending rates up 10 to 30 basis points, Rong Viet Securities Corporation reported.

The figures showed lending rates have spiked dramatically, mainly for loans with a tenor of at least one year.

Nguyen Hoang Minh, head of the Vietnam Banks Association’s Office in HCMC, said interest rates are agreed on by lenders and borrowers, depending on the market demand and borrowers’ creditworthiness.

According to him, interest rates for short-term loans ranging from around 5% to 7% and from 7% to 10% annually for medium- and long-term loans are appropriate under the current circumstances, given that many countries have tightened their monetary policies over runaway inflation. 

“Banks in the city would expend efforts to reduce costs so that they could offer clients easier access to loans with the best interest rates,” Minh said at a conference on capital mobilization last week.

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