Businesses struggle to pay off old loans

Currently, although banks have announced a reduction in lending interest rates and offered many preferential loan packages, in reality, old loans are still at high interest rates, causing difficulties for businesses.

Cannot borrow more because there is no more collateral

Ms. Pham Thi Nga, owner of a business specializing in manufacturing and exporting rattan and bamboo chairs in Bien Hoa city (Dong Nai province), said that her company has a 7-year loan from a bank. Initially, the loan interest rate was 9%/year. After several adjustments, the current interest rate remains at 8.5%/year.

"For the past 2 years, business has been difficult, revenue has decreased a lot, but my company still struggles to pay the interest on this loan. It is estimated that the profit made is only enough to cover the bank loan interest," Ms. Nga shared.

According to this business owner, although the bank's interest rate is currently low, it is not easy for businesses to borrow again. Because the prerequisite for borrowing from the bank is that the business must have collateral, and her business has already mortgaged its assets to borrow the old loan, so now it no longer has assets to mortgage.

"In this context, if we are supported to reduce interest rates on old loans and continue to disburse more favorably, businesses can survive and seize their opportunities when the market recovers," said Ms. Nga.

Ms. Mac Thi Mui, Director of a garment company in Hai Duong, said that her business has a loan of 20 billion VND at a bank from 2022 to present. "At that time, we accepted to borrow at an interest rate of 12%/year because savings interest rates increased rapidly. But now the input interest rate has reached a record low, why is the lending interest rate still fixed at 11%/year?" Ms. Mui wondered.

Deputy Secretary General of the Vietnam Association of Seafood Exporters and Producers To Thi Tuong Lan said that in 2022, the USD lending interest rate was only about 2%/year, then gradually increased to 4%/year and is now at 5.5%-6%/year. Meanwhile, the exchange rate has been fluctuating strongly recently, causing disadvantages for companies borrowing in foreign currency.

"Businesses that are borrowing in VND also have to pay interest rates of 8%-8.5% per year. This is an interest rate beyond their ability to pay," said Ms. Lan.

Meanwhile, the White Book on Women-Owned Small and Medium Enterprises published in January 2024 shows that in Vietnam today, the majority of women-owned enterprises are micro and small in scale; the number of large-scale enterprises with the capacity to lead supply chains is still small. Many enterprises face difficulties in accessing resources, including capital.

Sharing the same view, Mr. Nguyen Van Than, Chairman of the Association of Small and Medium Enterprises, said that the mobilization interest rate is currently at a record low in the past 20 years, but the interest rate on old loans remains high. Mr. Than suggested that the State Bank needs to have a "strong" solution for commercial banks to lower the interest rate on old loans of enterprises.

When will the interest rate on the old loan be reduced?

Explaining why new loan interest rates have decreased but old loans are still high, a representative of a joint stock commercial bank analyzed that after the SCB Bank incident, the system of commercial banks competed to increase deposit interest rates, in some places up to 9%-10%/year to attract customers to deposit money.

At that time, many customers chose to deposit for 24-36 months and until now, banks are still paying high deposit interest rates as committed. "However, this pressure will gradually decrease, thereby, banks will gradually reduce long-term lending interest rates for customers," said the bank leader.

Deputy Governor of the State Bank of Vietnam Dao Minh Tu affirmed that the capital resources in the bank are currently very abundant, ensuring full liquidity, even surplus. In particular, interest rates are at the lowest level in the past 20 years, creating favorable conditions for businesses to borrow capital to do business.

However, in reality, some commercial banks still apply high interest rates to old loans. The State Bank has required commercial banks to announce average lending interest rates for people to choose.

"From the end of 2023 until now, the State Bank continues to direct commercial banks to cut costs and profits to lower lending interest rates, including new and old loans," said Mr. Tu.

Source