VietNamNet Bridge – Several weaknesses prevent SMEs from accessing long-term loans, Hoang Viet Trung, deputy director of the SBV branch in Ha Noi, tells Kinh te&Do thi (Economic and Urban Affairs).

Credit institutions' operations in-creased in the last few months of 2014. However, enterprises still face many difficulties, because the country's economy is still recovering. Do you think credit will flow into non-production fields?

According to our statistics, by the end of 2014, the city's total outstanding debt, including loans and investments, was VND1,035 trillion (US$49.3 billion), of which VND767 trillion ($36.5 billion) was loans for business and production. It means that capital mainly flowed into production and business channels.

Moreover, there are also many difficulties in other investment channels like the stock market and real estate. So banks have focused their activities on loans for production and business.

What are your thoughts on SME loans in Ha Noi lately?

Loans for SMEs have been increasing over the past few years. The joint-stock commercial bank sector recorded the highest loans for SMEs out of all credit institutions in the city.

By the end of 2014, total outstanding debts had increased to VND323.961 trillion ($15.4 billion), compared with VND183.415 trillion ($8.7 billion) in the same period in 2010. This shows that commercial banks have changed their points of view about credit, and have been trying to expand loans for SMEs.

SMEs are thirsty for capital, while many banks still give bigger enterprises priority – especially State-owned enterprises. Is it true that it's harder for SMEs to access loans than other businesses?

At the moment, most banks have plans to promote loans for SMEs. However, it is still difficult for them to access loans due to their lack of mortgage assets, weakness of financial abilities and low transparency levels. Most banks hesitate to give loans to SMEs due to the risk of instability, and because of how easily they can be affected by changes in the outside environment.

However, I want to affirm that all enterprises, both State-owned and SME, must meet certain requirements in order to get loans: financial transparency, feasibility of projects and effective business plans.

You said that mortgage assets were one of the barriers SMEs met when applying for loans. Why don't we use the Credit Guarantee Fund for SMEs to act as guarantee for enterprises?

The fund's regulations were very tight as regulations for commercial banks. For example: An enterprise must have a mortgage, and meet all requirements about solvent abilities. If they meet all those conditions, enterprise can borrow loans from banks instead of from the credit guarantee fund.

At the moment, the Ha Noi People's Committee is drafting a regulation on credit risk management for the credit guarantee fund. The State Bank of Viet Nam will also issue instructions for improving the activities of the credit guarantee fund and other credit organisations.

Many enterprises said that they had to borrow short-term loans for long-term production plans. What kind of measures can be used to increase the amount of medium- and long-term loans available, and expand enterprises' credit sources?

During recent years, enterprises have had more access to short-term loans than other loans.

Outstanding debts from medium and long term loans made up around 20 per cent of total outstanding debts. A reason for this is that banks still faced difficulties in mobilising long-term capital sources, while few banks found sponsoring programmes supported by international financial institutions. In addition, SMEs did not convince banks that they had the abilities required to realise their investment project goals.

In order to expand loans for SMEs, I think commercial banks should be aware that they are a necessity for SMEs. So investment should be focused on supporting SMEs so they can develop investment projects. Banks should provide loans based on the effort required for the projects.

Commercial banks should develop preferential credit policies for customers who are low-risk. These policies could include special interest rates, pay-back periods and especially mortgage assets.

In addition, SMEs should also strive to reform and better themselves, with the aim to strengthen credit organisations' trust in them.

VNS