The State Bank of Vietnam (SBV) on July 6, 2022 held an online conference on the implementation of the government’s Decree 31/2022 on supporting enterprises, cooperatives and business households with the 2 percent interest rate subsidy program.

Only healthy businesses will get loans

The subjects of the interest rate subsidy program are enterprises, cooperatives and business households in different fields, including aviation, transportation and warehousing; tourism, accommodation and food services; education and training; agriculture-forestry-seafood; processing and manufacturing industry; software programming and related activities; information service; and construction activities which directly serve business fields, except construction for real estate businesses.

This also includes projects on developing social housing and housing for factory workers, and upgrading of old apartment blocks (the list of projects will be compiled by the Ministry of Construction from reports of municipal and provincial authorities and will be made public on the ministry’s e-information portal).

Borrowers need to satisfy common requirements set by commercial banks. They can sign contracts on borrowing money and get disbursements in the time from January 1, 2022 to December 31, 2023. They have to use loans for the right purposes. And they must not get support from other programs.

Pham Huy Hung, deputy chair of the Vietnam Association of Small and Medium Enterprises (VinaSMEs), commented that the requirements are relatively strict. Only businesses with no bad debts and have revenue can be eligible for preferential loans.

Meanwhile, according to Hung, most SMEs, which have experienced tough years of the Covid-19 pandemic, are in bad condition with bad debts and no collateral, and cannot satisfy the requirements.

Commercial banks tend to be very cautious when providing loans.

He noted that many commercial banks are running out of credit limits, and there is pressure on inflation, which may force Vietnam to tighten monetary policy to prevent inflation. If so, it would be difficult to seek capital though businesses are in dire need of it.

Pham Duc An, chair of Agribank, said the credit growth rate had reached 9.35 percent as of June 30, while mobilized capital had increased by 4.51 percent only, a mild increase compared with the same period last year.  Therefore, banks may have problems in liquidity when arranging capital to lend under the program.

In the case of Agribank, the credit growth rate limit is 7 percent for 2022, while it was six percent in the first half of the year. If the central bank doesn’t lift the credit growth rate limit, it will have to restrict lending in the last six months of the year.

However, if lifting the credit limit for banks, the money supply will be higher, which will lead to high inflation.

CEO of TPBank Nguyen Hung estimated that only 2,000 clients can meet the requirements to get  loans under the program, with the value accounting for less than 10 percent of total outstanding loans.

Loosening requirements

Hung recommended that it is necessary to loosen the requirements for lending to have more enterprises access the support package. For example, banks should lend to businesses if they know they can pay debts.

He stressed the need to consider and approve loans quickly so that capital can reach borrowers as soon as possible. It’s necessary to draw lessons from the rental support program, under which only 1 percent of capital has been disbursed after several months of implementation.

In principle, clients whose debts have been restructured recently are not eligible for the interest rate subsidy program. Hung suggested that enterprises be eligible for borrowing money as they need capital.

SBV Deputy Governor Dao Minh Tu said the requirements on borrowers and the subjects of the program have been considered thoroughly and approved by the National Assembly and the Government.

Only when enterprises can satisfy the requirements will they be able to borrow capital. However, during the implementation of the program, loosening the requirements would be considered by ministries and branches.

According to Tu, the amount of outstanding loans at credit institutions has reached VND2.8 quadrillion this year.

Tran Thuy