Loan interest rates drop to very low 6-7%, businesses still do not borrow

Businesses feel the interest rate reduction most clearly

As a business operating in the transportation sector with more than 100 vehicles, An Phuoc Automobile Transport Company Limited (Dak Lak province) feels most clearly the difficulties of the economy when the demand for freight transport has decreased sharply since the Covid-19 pandemic.

Mr. Pham Dong Thanh - Director of An Phuoc Automobile Transport Company Limited, Chairman of Dak Lak Province Young Entrepreneurs Association - said that the lucky thing for his business is that it operates in the Central Highlands, an area with many goods that need to be transported such as coffee, durian, pepper, macadamia, etc. Thanks to that, his business does not fall into a state of exhaustion like other transportation units in other places.

However, Mr. Thanh admitted that the company's revenue has decreased by 20-30% since the Covid-19 pandemic.

Mr. Thanh noticed that businesses in Dak Lak province, including An Phuoc, have been able to borrow capital from banks at much lower interest rates than in early 2023. The interest rate for medium-term loans that his company borrows is currently below 10%/year, and the interest rate for short-term loans is below 7%/year. According to him, this interest rate is providing very good support for businesses.

“At the beginning of 2023, bank interest rates were up to 13%, even 15% per year, but now they are below 10% per year for medium and long-term loans; this has met the expectations of businesses. For short-term loans, interest rates used to be 10% or more, but now they are only around 7%, this interest rate is appropriate,” said the director.

However, Mr. Thanh suggested that there should be a flexible policy in determining the value of assets securing loans for businesses. Specifically, land leased by businesses for a long time to serve production and business, but currently not recognized by banks as collateral.

“Land leased with annual payments is not recognized by banks as collateral. To be recognized, businesses are forced to spend a huge amount of money to own that asset,” he said.

The biggest problem for businesses today, according to Mr. Thanh, is the lack of orders, leading to no need for loans.

“Businesses now have no need to borrow capital, they don’t know what to borrow for. Most businesses have seen a decrease in orders as customer demand has dropped sharply. Therefore, the important thing is how to stimulate demand and increase the supply of goods for businesses to develop,” he said.

Banks worry that businesses will not borrow capital

At the banking industry conference held in Dak Lak last weekend, Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu also acknowledged the reality of businesses wanting to borrow capital but not being eligible, while businesses that are eligible do not have a need to borrow capital.

“If you borrow money but cannot sell your products, or if production slows down, what is the point of borrowing money when you have to pay interest? Resolving difficulties for businesses is the way to create jobs for people and develop the economy,” the Deputy Governor noted.

Demand for loans from customers, including businesses and individuals, has decreased sharply. (Photo: Tuan Nguyen)

According to Mr. Dao Duc Hung, Deputy Director of BIDV Dak Lak branch, in the first 9 months of this year, credit growth of BIDV Dak Lak branch reached more than 10%, much higher than the general level of the whole industry.

However, Mr. Hung said that the biggest difficulty now is that although banks are ready to provide capital, the demand for loans from customers, including businesses and individuals, is declining sharply.

“The reason is that the production expansion of enterprises is not as good as in previous years; the consumption demand of people is also not maintained as before, reducing the capital demand of goods manufacturing enterprises as well as trading enterprises,” said Mr. Dao Duc Hung.

The current solution, according to Mr. Hung, can only stimulate consumer demand, thereby stimulating customers' capital needs.

BIDV Dak Lak Deputy Director said that the lowest lending interest rate at this branch is 6%/year for loans with terms under 6 months and 7.5%/year for terms of 12 months. For feasible projects with guaranteed repayment capacity, the bank is willing to lend. However, the bank cannot provide capital for new customers without collateral.

Source