In Vietnam, many businesses close after several years of development

Businesses complain they find it difficult to access loans, while banks say many businesses don’t have feasible business plans and cannot use capital effectively.

As many as 97 percent of Vietnam’s businesses are small and medium sized. Many of these businesses die after several years of development, a report says.

In Vietnam, many businesses close after several years of development



Small and medium enterprises (SMEs) that meet difficulties are mostly in the production sector. The lack of capital, management skills, and problems in business environment and policy have been cited as reasons why SMEs cannot develop strongly.

According to Insight Asia, of the big difficulties faced by SMEs, the lack of capital is the biggest. 62 percent of surveyed businesses said they are lacking capital, mostly to build workshops and buy machines.

Meanwhile, customer sources is the second biggest problem, cited by 60 percent of businesses, and the difficulty in workshop and factories is the third biggest problem, cited by 55 percent of businesses.

SMEs that meet difficulties are mostly in the production sector. The lack of capital, management skills, and problems in business environment and policy have been cited as reasons why SMEs cannot develop strongly.

Tran Ngoc Liem, deputy director of the Vietnam Chamber of Commerce and Industry (VCCI) HCM City Branch, also cited a report on provincial competitiveness index (PCI) as showing that accessing bank loans is a big problem for SMEs.

 


Only 40 percent of micro businesses can access bank loans. The figure is 62 percent for small enterprises and 81 percent for large-scale ones.

SMEs have to bear higher interest rates, while they mostly can borrow short-term capital. About 90 percent of SMEs said they have to mortgage assets for loans, a relatively high proportion compared with larger enterprises.

The director of a small mechanical engineering enterprise in Hanoi said banks apply rigid principles when providing loans.

“They only agree to provide loans if we have mortgaged assets. However, most small enterprises don’t have assets to mortgage,” he complained.

To solve the problem, Liem said it is necessary to form a more convenient and transparent capital supply system, and businesses have to improve the quality of the building of business plans.

Tran Khai Hoan, deputy CEO of Nam A Bank, said the problems in accessing bank loans belong to businesses. In many cases, businesses don’t have reasonable plans to use capital effectively.

“They have strategies on products and market development, but they don’t have a plan to use the capital in the most effective way,” he said.

“When I asked them what they would use the capital for, they said they found some land plots and they want to borrow money to buy the land in anticipation of the price increase. However, after buying land, they will not have money for production,” Hoan said.

Linh Ha 

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