Governor 'shows ways' for small and medium enterprises to borrow capital

At the working session on the evening of July 6 between the Government Standing Committee and the Executive Committee of the Association of Small and Medium Enterprises on solutions to remove difficulties for businesses, Governor of the State Bank of Vietnam Nguyen Thi Hong affirmed that the State Bank of Vietnam is one of the very few central banks in the world that has reduced interest rates in the current difficult context.

Therefore, lowering interest rates is an effort of the State Bank because at that time, the State Bank must steer and coordinate policy tools in order to stabilize not only the monetary market but also the foreign exchange market, ensuring the safety of banking operations.

Besides, domestically, credit institutions are also actively reducing interest rates, the average interest rate has decreased by about 1% compared to the end of 2022. Due to the delay in policy, credit institutions may continue to reduce in the coming time.

The head of the State Bank affirmed that removing difficulties for businesses and people is always a concern of the banking industry, especially in the current context, people and businesses, especially small and medium enterprises (SMEs), are facing many difficulties in business activities and in fact, this industry has received many opinions revolving around two issues, which are interest rates and credit access.

Regarding the issue of credit access, Ms. Hong said that currently, the Law on Credit Institutions stipulates that credit institutions require borrowers to provide documents proving the feasibility of the project plan and financial capacity to ensure the ability to repay the debt and the correct use of capital.

The SBV's guiding circular also stipulates the same; the SBV does not stipulate that loans must have collateral (in fact, credit institutions still provide unsecured loans if customers can prove their ability to repay the debt);

The State Bank also does not regulate the loan ratio based on the value of collateral, nor does it regulate the documents that customers must provide to credit institutions to prove their eligibility for loans. These issues are completely regulated by credit institutions in their own internal procedures.

*Governor Nguyen Thi Hong speaks at the Conference. (Photo: SBV).*

“The State Bank regularly directs credit institutions to review loan procedures, creating favorable conditions for businesses to access capital but still ensuring compliance with legal regulations,” the Governor said, adding that although the lending regulations have not changed, in recent times, the State Bank has tried to create favorable conditions for businesses to borrow capital by issuing Circular 02 allowing credit institutions to restructure debt repayment terms and maintain the same debt group for customers.

There needs to be interaction between banks and businesses.

The Governor said that recently, the State Bank has directed the State Bank branches in provinces and cities to organize many conferences connecting banks and businesses to resolve difficulties in credit and interest rates. Businesses frankly discussed problems such as not being able to borrow capital from any bank, banks explaining why they could not borrow capital, etc.

To support SMEs, the State Bank has taken measures to regulate the ceiling interest rate for short-term loans for priority sectors, including SMEs. The State Bank has issued a circular guiding lending according to value chains and high-tech agricultural enterprises. However, the difficulties of SMEs need to be fully identified and assessed, from which appropriate and correct solutions can be found. Therefore, the Governor recommended that the Government organize a conference to comprehensively assess the implementation of policies to support SMEs according to the Law on Support for SMEs in order to effectively resolve the issues.

“Accordingly, each ministry, sector and locality has solutions and policies to join in removing difficulties for SMEs. No single sector or policy can solve all problems,” the Governor said.

Among the support solutions, the Governor believes that enhancing the operational efficiency of local credit guarantee funds is very important because localities have the best understanding of business operations in the area. If resources are allocated to guarantee loans for SMEs, the Governor believes that credit growth will be higher and SMEs will receive more support.

To increase access to capital for businesses, the Governor said that SMEs themselves need to overcome their own limitations because these are the issues that are hindering banks from making lending decisions. That is, SMEs need to improve their corporate governance, financial situation, information transparency, etc.

By the end of June 2023, the economy's outstanding debt reached VND 12,423 trillion, up 4.73% compared to 2022. Outstanding debt to enterprises was about VND 6,300 trillion (up 4.66% compared to 2022, accounting for 51% of outstanding debt to the economy). Outstanding debt to SMEs reached nearly VND 2,300 trillion, up nearly 4% compared to the end of 2022, accounting for about 18.5% of outstanding debt to the economy. Currently, most credit institutions are participating in lending to SMEs, many credit institutions have proactively implemented preferential credit programs and products with lower borrowing conditions and interest rates than conventional credit products.

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