Diversifying capital mobilization channels, creating breakthroughs for the private economy

Most banks have direct lending relationships with the private sector.

Increase investment in private enterprises

Sharing at the recent workshop “Bank capital contributes to promoting the private economy”, Dr. Le Duy Binh - Director of Economica Vietnam said that over the past four decades, the private economic sector in Vietnam has had remarkable development, transforming from a small, fragmented economic sector into an important pillar of the economy. According to the General Statistics Office, the domestic private economic sector currently contributes approximately 50% of GDP, this sector creates jobs for about 85% of the country's workforce. Thus, the private economy currently determines the quantity and quality of more than 50% of Vietnam's GDP.

Of the total social investment capital expected to reach about 174 billion USD by 2025, private investment will contribute about 96 billion USD or approximately 56%. Public investment will only contribute about 36 billion USD, the FDI sector about 28 billion USD, and other investment about 14 billion USD. Thus, a 1% increase in private economic investment will bring an increase in absolute value equivalent to a 2.5% increase in public investment and a 3.5% increase in foreign investment. This shows that the impact of domestic private investment growth on aggregate demand is much larger than that of investment from the public sector and the foreign-invested enterprise sector.

Recognizing the importance of the private economy, the Party, State and Government have recently issued many important directives for this sector. In Resolution No. 10-NQ/TW dated June 3, 2017, the Resolution of the 5th Conference of the 12th Party Central Committee on developing the private economy into an important driving force of the socialist-oriented market economy has set the goal of developing a healthy, effective and sustainable private economy, truly becoming an important driving force of the socialist-oriented market economy, contributing to rapid and sustainable socio-economic development. In a recent speech, General Secretary To Lam emphasized the need to identify private economic development as a long-term strategy and policy of the country. The private economy, together with the state economy and the collective economy, is the core group to build an autonomous, self-reliant and self-reliant economy. Recently, the Prime Minister signed a Decision to establish a Steering Committee to develop a private economic development project, demonstrating a spirit of drastic action in creating conditions for the private economy to develop, contributing to realizing the target of minimum economic growth of 8% set by the Government, creating a premise for the upcoming period according to the policy of the Party and the National Assembly. This is a very big task for all levels and sectors from the central to local levels. One of the key solutions that needs to be implemented is to maximize the release of development resources for the private economy, creating opportunities for the private economy to effectively access important resources such as capital, land, human resources, technology, etc.

As the lifeblood of the economy, the banking sector has actively implemented synchronous solutions to promote credit growth to meet the capital needs for production and business of people, businesses in general and private enterprises in particular. By the end of 2024, outstanding credit for private enterprises at credit institutions reached nearly 7 million billion VND, an increase of about 14.7% compared to 2023, accounting for about 44% of outstanding credit in the economy.

According to the Deputy Governor of the State Bank of Vietnam, most domestic credit institutions, foreign bank branches, microfinance institutions... have direct lending relationships with the private sector, including small and medium enterprises, not just banks for the large segment of state-owned enterprises.

Ms. Phung Thi Binh, Deputy General Director of Agribank, said that the bank currently has a loan balance of 1.74 million billion VND, of which 90% is for the private economic sector.

Agribank is one of the leading state-owned commercial banks in capital mobilization and support for the private economic sector. Ms. Phung Thi Binh, Deputy General Director of Agribank, said that the bank currently has a loan balance of VND 1.74 million billion, of which 90% is for the private economic sector. "The above figures show that we are very interested in private economic customers, especially when Agribank is always associated with the mission of developing rural agriculture and farmers," Ms. Binh affirmed and added that currently, Agribank is implementing 9 preferential credit programs for all subjects, of which 8 programs are for private economic households, including import-export enterprises, small and medium enterprises, consumer production and business, etc. In these programs, the interest rate applied is 1-2% lower than normal loans per year and there are preferential programs for import-export and participation in the value chain. To bring private economic households, specifically small and medium enterprises, closer to banks, Agribank has implemented links with farmers and women's associations.

Joint stock commercial banks are also actively implementing many incentive programs for the private enterprise sector. For example, LPBank is dedicating more than VND 15,000 billion to preferential credit loan programs with flexible interest rates. Right from the first months of 2025, LPBank "launched" a loan package of VND 8,000 billion with deeply reduced interest rates from only 4.8%/year for businesses, for medium and long-term loans, interest rates are only from 7%/year with a fixed term of up to 12 months. LPBank is also prioritizing the development of green credit products for businesses and business households that apply green technology, environmentally friendly products, etc.

"Accompanying businesses to develop in the era of growth, LPBank not only provides flexible loan capital but also meets all types of diverse businesses, promotes effective business activities of the private economy, helps businesses have a solid foundation to develop strongly, contributing to the common prosperity of the country", LPBank representative shared.

LPBank not only provides flexible loans but also supports diverse business types, promoting the operational efficiency of private enterprises.

Bank capital alone is not enough

Currently, the capital demand of enterprises to achieve the GDP growth target of 8% or more is very large, which also creates a lot of pressure on capital mobilization for banks. To meet the capital demand of the economy, Ms. Phung Thi Binh said that in addition to the proposal to retain profits to increase charter capital, Agribank is also actively diversifying capital mobilization channels, maintaining stable mobilization interest rates to have more room to lower lending interest rates to support enterprises.

Affirming that bank capital plays a very important role in promoting the private economy, experts say that businesses should not rely too much on bank capital but need to be more proactive in investment capital to seize opportunities in the new context. Mr. Nguyen Van Than admitted that currently, small and medium enterprises are still heavily dependent on bank capital, especially when the mechanism in the capital market is still inadequate. There is no other way, businesses must improve themselves with science and technology, in addition to science and technology, it is necessary to link businesses together. In addition to capital from banks, businesses can also mobilize loans from funds and international organizations at home and abroad.

Dr. Nguyen Dinh Cung - former Director of the Central Institute for Economic Management (CIEM) said that private enterprises are present everywhere. In some fields and industries, private enterprises do better than state-owned enterprises. However, at present, private enterprises are still developing passively and facing many barriers, the biggest of which is institutions. Institutions are barriers, hindering the development of many enterprises, including the private enterprise sector. Private enterprises have not been encouraged or supported systematically and systematically to unleash their potential and resources.

In the new context, in the era of national development, Dr. Nguyen Dinh Cung believes that it is necessary to create motivation and space for the private economic sector to grow by about 10%, thereby completing the economic growth target of 2025. To do this, it is necessary to focus on two pillars.

One is institutional reform. Including removing and transforming the legal system that is overlapping, duplicate, unclear, ineffective, non-specific, and not transparent...

Second, regarding capital from enterprises. It is necessary to create an environment and a policy system to support and encourage the development of private enterprises. Create an environment for enterprises to access capital, land, science and technology, data... in a timely manner, large enough in scale and synchronously to break through to a new level, from micro to medium, medium to large - a very difficult threshold for enterprises. "The framework for enterprise development is not only credit capital, but also long-term investment capital. Thus, the State needs to open up a more diverse investment capital market, reducing the burden on banks. It is necessary to develop a capital market with various types of funds, which we currently lack a lot. Because of the lack, many enterprises have not been able to develop... The upcoming strategy of the Politburo will mobilize all resources of the private economy, all the creativity and dynamism of this sector, thereby helping to take full advantage of the development opportunities of the private economic sector in general and the whole economy" - Dr. Nguyen Dinh Cung expects.

In addition to capital from banks, ASCO Auditing Company Chairman Nguyen Thanh Khiet also said that the Government and financial institutions need to increase capital for credit guarantee funds and expand the scope of guarantees to help many small and medium-sized enterprises access capital more easily. At the same time, it is necessary to improve the guarantee process to ensure transparency and efficiency, helping businesses save time and costs when accessing capital.

In addition, it is necessary to promote alternative financial models to expand capital mobilization channels such as financial leasing, supply chain credit by allowing businesses to borrow based on input and output contracts, helping them maintain production activities without collateral; crowdfunding); peer-to-peer lending; Directly connecting investors and businesses, reducing strict requirements of banks and helping small businesses access capital more easily...