Banks now targeting SMEs for disbursement

Instead of turning their back to small and medium-sized enterprises (SMEs) as they did in the past, commercial banks are approaching enterprises despite problems in accounting and collateral.

According to the General Statistics Office (GSO), SMEs accounted for 98 percent of total enterprises in Vietnam, making up 40 percent of the nation’s GDP and using 50 percent of the labor force. In 2018 alone, 131,300 enterprises were established and the majority of them were SMEs.

Banks now targeting SMEs for disbursement

However, according to the Vietnam Chamber of Commerce & Industry (VCCI), though playing a very important role in the economy, 70 percent of SMEs still cannot access official credit. More than 30 percent of SMEs cannot access bank loans and the other 30 percent say they find it very difficult to access bank loans.

SMEs don’t have valuable assets to mortgage for bank loans or standard accounting systems like big enterprises.

However, banks seem to have changed their view toward them. The lenders, in their plan to develop retail banking, now target SMEs as potential clients.

Some banks now lend money with no collateral required and offer flexible borrowing and debt payment methods to attract clients.

Hiep Luc Stainless Steel saw its revenue increase by VND1-2 billion a month after it borrowed money from banks. It plans to scale up the business in 2019 as it can approach the VND1 trillion credit program launched by Ban Viet Bank.

According to the General Statistics Office (GSO), SMEs accounted for 98 percent of total enterprises in Vietnam, making up 40 percent of the nation’s GDP and using 50 percent of the labor force. In 2018 alone, 131,300 enterprises were established and the majority of them were SMEs.


Mr & Mrs Clean has VND5.9 billion from Ban Viet to expand its business scale, estimating that the revenue would reach VND20 billion a year.

Meanwhile, Orient Bank is running a VND3 trillion credit program specifically targeting SMEs in the fields of import/export and distribution chain. The bank offerslending interest rates of around 7 percent per annum, which is competitive compared with other banks.

 

In addition to good lending interest rates, borrowers can also receive other preferences from the bank when using its international payment, guarantee and remittance services.

The VND3 trillion credit package is expected to be disbursed from April 1 to June 30, 2019.

According to Nguyen Dinh Tung, CEO of Orient Bank, only 21 percent of Vietnam’s SMEs can access global supply chains, while the figure is much higher among ASEAN countries, such as Thailand (30 percent) and Malaysia (46 percent).

The bank realized that the real demand for working capital of import/export and distribution enterprises is very high, and funding will bring big economic benefits.

This will help increase the value of global supply chains, especially when the financial market is becoming globalized and there are more and more transactions based on distribution chains.

In related news, MOF, in an effort to give stronger support to SMEs, is proposing an reduction in corporate income tax to 15-17 percent.

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