Debt guarantee: light at the end of tunnel for Vietnamese SMEs

Some experts believe that the government needs to come forward and provide a guarantee for SMEs (small and medium enterprises) to access bank debts.

Accounting for 90 percent of Vietnam’s total enterprises, SMEs are in an disadvantageous position to access preferential credit packages created during the COVID-19 crisis.

Debt guarantee: light at the end of tunnel for Vietnamese SMEs


To borrow money from credit packages, SMEs have to prove their economic losses caused by Covid-19 and their debt payment capability. Meanwhile, commercial banks are still applying very stringent procedures for capital disbursement and are not flexible in the context of the epidemic.

In early March, a credit package worth VND250 trillion was committed to by some commercial banks which aims to help Covid-19-hit businesses overcome current difficulties. The value of the package later rose to VND300 trillion as more banks committed to provide loans.

As of mid-April, the size of the credit package had doubled, according to some unofficial sources, which targets SMEs, individual clients and large enterprises.

To borrow money from credit packages, SMEs have to prove their economic losses caused by Covid-19 and their debt payment capability. Meanwhile, commercial banks are still applying very stringent procedures for capital disbursement and are not flexible in the context of the epidemic.

Can Van Luc, chief economist of BIDV, pointed out four main characteristics of the credit package.

 


The loans aim to help businesses and business households suffering from Covid-19 improve liquidity and working capital.

The capital for the credit package is from people’s and businesses’ deposits, not from the state budget.

The disbursement procedures are nearly the same as procedures for normal loans.

The credit package focuses on priority business fields.

The loans to be disbursed under the preferential program will be taken into account when calculating the banks’ credit growth limits in 2020. The lower interest rates will cause banks’ profits to decrease.

Nguyen Van Phu from French National Center for Scientific Research (CNRS) commented that banks have taken prompt action by launching the VND300 trillion preferential credit package. However, they still are cautious when providing loans because of high risks.

He said only when the state acts as the last guarantor for these debts (potentially bad debts) will the credit support package be fully effective.

Meanwhile, Nguyen Tri Hieu, a respected economist, suggested that banks should provide loans via credit guarantee fund. The fund guarantees that enterprises can borrow money from banks. If enterprises cannot pay debts, the fund will have to pay the debts to banks.

With the credit guarantee fund, the government can use its prestige to guarantee the SMEs’ bank debts. If so, the government won’t have to spend money in the immediate time to assist enterprises and will only have to use the state’s budget when enterprises cannot pay debts.

Hieu thinks that, to save SMEs, the government should design a specific credit package worth 2 percent of GDP, or VND150 trillion. 

Mai Chi

Vietnam businesses eyed by foreign investors

Vietnam businesses eyed by foreign investors

Instead of following procedures to become nvestors, foreign enterprises are preferring to ‘take a shortcut’ by taking over Vietnamese businesses, which allows them to penetrate the market more quickly.

VN businesses need capital immediately: economist

VN businesses need capital immediately: economist

Businesses would rather borrow money at commercial interest rates and get loans immediately than wait for preferential loans, according to Vu Thanh Tu Anh, a respected economist.

 
 

Other News

.
Runway upgrade at TSN airport completed
Runway upgrade at TSN airport completed
BUSINESSicon  10/01/2021 

The runway renovation project commenced on June 29 last year, with a total investment of some VND2 trillion.

For the sake of sustainable fish export
For the sake of sustainable fish export
BUSINESSicon  10/01/2021 

The price of tra (pangasius) fish has experienced one fluctuation after another. This year is forecast to be a recovery time for the fish.

Minister urges quick building of project on natural forest protection
Minister urges quick building of project on natural forest protection
BUSINESSicon  10/01/2021 

The forestry sector should take swift action to build a project on zoning off and protecting natural forests in the time to come, said Minister of Agriculture and Rural Development Nguyen Xuan Cuong.

Resilience helps Vietnam overcome year of COVID-19
Resilience helps Vietnam overcome year of COVID-19
FEATUREicon  09/01/2021 

Though COVID-19 has sent the global economy into one of its worst recessions ever, Vietnam posted GDP growth of 2.91 percent in 2020 thanks to its solid control of outbreaks and timely support to both enterprises and local people.

Construction of T&T Group’s modern trade center commences in Dak Nong Province
Construction of T&T Group’s modern trade center commences in Dak Nong Province
BUSINESSicon  09/01/2021 

The construction of the VND645 billion Dak Mil Trade Center was kicked off in the Central Highlands province of Dak Nong on January 6 by the Vegetable Import and Export Joint Stock Company (a member of T&T Group).

VIETNAM BUSINESS NEWS JANUARY 10
VIETNAM BUSINESS NEWS JANUARY 10
BUSINESSicon  10/01/2021 

VNR500, top 10 prestigious companies honoured

Vietnamese, US officials talk economic, trade issues
Vietnamese, US officials talk economic, trade issues
BUSINESSicon  08/01/2021 

Minister of Industry and Trade Tran Tuan Anh has held phone talks with US Trade Representative (USTR) Robert Lighthizer to discuss bilateral economic and trade issues.

Opportunities opened for food processing industry
Opportunities opened for food processing industry
BUSINESSicon  08/01/2021 

According to Vietnamese trade counselors, in 2021, Vietnamese goods, in general, have a great opportunity to export to Europe, Northern Europe, the US, the Eurasian Economic Union, Japan, South Korea, and China.

Insurance groups signal intent to raise funds for stock boost
Insurance groups signal intent to raise funds for stock boost
BUSINESSicon  08/01/2021 

Insurance companies in Vietnam are lifting the curtains on their public fundraising plans, seen as a step towards luring more cash in the promising insurance and reinsurance market.

Vietnam to be among top growth performers again in 2021: HSBC
Vietnam to be among top growth performers again in 2021: HSBC
BUSINESSicon  09/01/2021 

Vietnam posted the fastest growth in Asia in 2020 and will once again be among the most outstanding performers in the region this year, according to the Hong Kong Shanghai Banking Corporation (HSBC).

FDI enterprises increase but more losses reported
FDI enterprises increase but more losses reported
BUSINESSicon  08/01/2021 

The number of foreign direct investment (FDI) enterprises continues to increase in Vietnam, but more are reporting losses. 

VIETNAM BUSINESS NEWS JANUARY 9
VIETNAM BUSINESS NEWS JANUARY 9
BUSINESSicon  09/01/2021 

Credit growth forecast to reach 13-14 percent this year: SSI

Vietnam imports rice from India for first time
Vietnam imports rice from India for first time
BUSINESSicon  08/01/2021 

Vietnam’s rice output is more than enough to satisfy domestic demand, but country is importing rice from India to use mostly for animal feed.

Property prices expected to rise 10 percent in 2021
Property prices expected to rise 10 percent in 2021
BUSINESSicon  08/01/2021 

Real estate prices in 2021 are expected to increase by 10 percent over the previous year, said Nguyen Van Dinh, deputy general secretary of the Vietnam Real Estate Association (VNREA).

Spikes in rent scaring away industrial zone tenants
Spikes in rent scaring away industrial zone tenants
BUSINESSicon  08/01/2021 

The supply of industrial land and real estate has so far not kept up with the ever-rising demand from manufacturers and investors, leading to price hikes like never before.

New entity to invigorate Vietnam’s stock markets
New entity to invigorate Vietnam’s stock markets
BUSINESSicon  07/01/2021 

With general optimism well-founded for Vietnam’s stock market building in the past year, there is now significant anticipation for 2021 with the arrival of a new entity to run the country’s exchanges.

High expectations laid out through fresh policy move
High expectations laid out through fresh policy move
BUSINESSicon  08/01/2021 

Three amended key laws on securities, enterprises, and investment have now come into force.

Vietnam’s manufacturing output returns to growth in final month of 2020
Vietnam’s manufacturing output returns to growth in final month of 2020
BUSINESSicon  08/01/2021 

The Vietnamese manufacturing sector ended the year 2020 in growth territory as business conditions improved following disruptions caused by a succession of storms in November, with output, new orders and employment all increasing in December,

Stage set for scale-up of nation’s rice
Stage set for scale-up of nation’s rice
FEATUREicon  07/01/2021 

Vietnam’s rice processing and trading have overcome the difficulties caused by the ongoing pandemic to acquire the export turnover of over $3 billion in 2020, a record in the past nine years, with exporters remaining bullish over future prospects.

4% inflation target set for 2021 within reach: experts
4% inflation target set for 2021 within reach: experts
BUSINESSicon  07/01/2021 

Vietnam is likely to meet its target of reining in inflation at a rate of below 4% in 2021, although experts warn that unfavourable factors could impact market fluctuations.

 
 
 
Leave your comment on an article

OR QUICK LOGIN