HA NOI (VNS) — Small and medium-sized enterprises (SMEs) and micro enterprises (MEs) are facing barriers in accessing trade financing, despite their remarkable contribution to the economy.
|Pottery made at the Chu Dau Pottery Company in the northern province of Hai Duong. — VNA/VNS Photo Hoang Hung|
Cao Sy Kiem, the chairman of the Viet Nam Association of Small and Medium Enterprises claimed that Vietnamese SMEs accounted for 95–97 per cent of the total businesses and employed more than half of the labour force in the business sector. They also produce 40-50 per cent of the consumer goods exported by the country.
Speaking at the conference on APEC Public–Private Dialogue on Addressing Impediments of SMEs and MEs in Accessing Trade Finance held in Ha Noi yesterday, Kiem noted that SMEs have been an important factor, actively contributing to social stability and poverty eradication in all regions of the country, especially in the remote and mountainous areas.
However, majority of the SMEs and MEs lacked the required capital to expand their production and businesses. It has been a difficult task for the enterprises to mobilise capital from the market through stocks, shares, and bonds, as most of them were not qualified to be listed on the stock exchange.
In addition, joint mobilised capitals were rare among the businesses due to the high interest rate, while the possibility of using external loans, such as ODA, was still limited.
"It is this reason that most SMEs and MEs had to depend on bank loans, which accounted for 80-90 per cent of their capital," he emphasised.
Most of the bank loans provided to the businesses were short term and were not linked with businesses and production circles.
SMEs and MEs have also had to go through complicated procedures in order to access the loans.
"Another barrier faced by the enterprises is a lack of clear and concrete guidance for implementation of policies relating to finance, money, trade, and investment, though the Government has issued several policies to promote the development of SMEs," he remarked.
The law on SMEs has not been issued, thus creating a differential treatment without equality with other sectors.
He recommended to swiftly develop and approve the law regarding SMEs and specify current viewpoints, policies, and mechanisms, such as tax extension and prioritised export credits for SMEs.
Sharing his viewpoint, Dinh Manh Hung, the deputy director of the Viet Nam Chamber of Commerce and Industry stated that in 2013, the access of businesses to bank loans was more difficult than it was in 2012, although they had expected it to become easier by December 2012.
"In fact, the bank interest rate in 2013 had decreased by about 2-3 per cent as compared to that during the end of 2012, but still rather higher than other businesses, especially SMEs," Hung reported.
He suggested that SMEs and MEs should regularly update government policies to make use of incentives in order to overcome the barriers.
They were urged to continue to implement the Business Process Re-engineering program as well as differentiating capital sources in order to reduce the risk rather than depend solely on the credit offered by banks.
Hung also requested the government to provide enterprises the opportunities to borrow loans by continuing to implement non-performing loans' solutions, to categorise debts, and to streamline the payment period.
Hongyeol Lee, the head of South Korean the Small and Medium Business Administration (SMBA)'s international marketing department shared the country's experiences in providing support to SMEs.
He noted that the SMBA tailored the export and import finance structure to support SMEs during the respective stages of the entire process. It also increased SMEs' access to finance by establishing SME exclusive financial guarantee fund with the purpose of extending credit guarantees for the liabilities of promising SMEs, which lacked tangible collateral.