That is also the reason why this sector has always been given priority in government policies, as well as in the credit policies of the banking sector.
To implement the Government’s resolutions on supporting business development, the State Bank of Vietnam (SBV) has built action programmes and drastically implemented many solutions, in a bid to improve the business environment and create favourable conditions for the development of enterprises in general and SMEs in particular.
Increasing capital absorption
In the current context, people and businesses, especially SMEs, are facing many difficulties in production and business activities. According to the Head of the State Policy Credit Division, SBV’s Department of Credit for Economic Sectors Tran Anh Quy, because both domestic and foreign economies are encountering challenges, it is difficult for businesses to demonstrate business efficiency. Meanwhile, credit institutions do not lower lending standards, so they cannot find qualified customers to provide loans.
The SBV has always paid great attention to the issue of capital access of enterprises, especially SMEs. SBV Governor Nguyen Thi Hong said that the SBV issued many circulars and guiding documents, to create breakthrough mechanisms and a legal corridor for credit institutions, to provide loans for customers, including the policy on rescheduling debt repayment, exemption and reduction of interest rates and fees, and new loans for customers during the COVID-19 pandemic.
In the face of difficulties in markets and exports, the SBV issued Circular No. 02/2023/TT-NHNN in April, to continue directing credit institutions to restructure the repayment term and keep the debt group unchanged for customers having difficulties in repaying their loans. The Circular is conducted from April 24, 2023, to the end of June 30, 2024.
In addition to decreasing the regulatory interest rates, the SBV requested credit institutions to trim operating costs and improve business efficiency to cut lending interest rates and develop appropriate credit packages for SMEs.
The SBV also directed credit institutions to improve the appraisal of customers, thereby increasing the ability to lend unsecured loans. “The policy of the State Bank of Vietnam is to direct credit institutions to streamline loan procedures and create favourable conditions for businesses to access capital following regulations. Because the lending conditions are under the Law on Credit Institutions, if lending conditions are changed, the law must be amended,” said SBV Governor Nguyen Thi Hong.
According to Dr. Le Duy Binh, Managing Director of Economica Vietnam, it is difficult for credit institutions to lower their lending standards, as loans are depositors’ money, so banks must be responsible to depositors.
“The management capacity and accounting system of SMEs are still inadequate, if they fail to conduct a clear accounting system, fulfil tax payment and social insurance payment for employees, and comply with legal regulations, banks will not be willing to lend money to such enterprises. Thus, banks must maintain lending standards because it will protect the interests of both depositors and society,” said Dr. Binh.
Expanding capital sources
According to Tran Anh Quy, the expansion of capital mobilisation channels, especially through the stock and bond markets, are very urgent problems. “Banks play a very important role in providing capital for the economy, but if we all depend on banks, there will be many arising problems, especially for a developing country like Vietnam and we cannot escape the trap of an economy that relies too much on banks. That poses many risks to the safety of the banking system, as well as the economy’s ability to meet medium and long-term capital. We are forced to look for other sources of capital, such as the issuance of shares to raise capital or through the stock and bond markets,” Quy said.
Sharing the same view, Dr. Le Duy Binh said that a bank’s medium and long-term capital supply has a certain limit and must rely on other capital sources. The recent stagnation of the bond market has greatly affected the capital mobilisation of SMEs. Despite the difficulties, this is still a very potential market for medium and long-term capital mobilisation of enterprises in general and SMEs in particular.
According to the expert, current regulations of Enterprise Law, Investment Law and Securities Law allow enterprises to issue more shares to increase capital. This source of capital is also an important mobilisation channel for businesses in the medium and long term.
SBV Governor Nguyen Thi Hong said, that SMEs need to overcome the limitations that are hindering banks in making lending decisions, including financial management, quality of goods and services, geographical indications, hygiene and safety, and others.
In addition, Governor Nguyen Thi Hong suggested that local credit guarantee funds and strengthen guarantees for businesses to borrow capital, because localities know best about the activities of businesses in the area.
“With the synchronous implementation of solutions, the SBV believes that credit will grow higher and SMEs will be given more support. In the near future, the SBV will continue to closely follow the direction of the Government, actively implement solutions, as well as coordinate with ministries, sectors and agencies, to effectively support businesses,” the Governor noted.
