Low loan interest rates still unavailable for small, medium enterprises

Soon after Tet New Year holidays, even though several banks announced a decrease in loan interest rates from 15-17 per cent per annum, many enterprises were unable to access loans from banks at that rate.

Companies cannot avail low interest rates

According to a Sai Gon Giai Phong Newspaper reporter, only a few big firms could access the low loan interest rate from 15-17 per cent, while many small firms still had to borrow at interest rates of over 20 per cent.

Small and medium enterprises are unable to access loans from banks at that rate (Photo:SGGP)

To avail of lower interest rates, big firms have to provide documents to prove their financial status, such as export contracts, export licences, etc. Hence many companies have no choice but to apply for high interest loans.

Vu Ngoc Ba, director of Gia Vy Garment Company, said that after banks announced a decrease in loan lending interest rates, he immediately applied for the same from a bank, but was offered interest rates of 22 per cent per annum.

As a result, the company had to cancel an export order worth US$30,000, being short of capital.

Economists have warned that if businesses cannot access bank loans, they will have to scale down production. This will slow production and subsequently shortage of goods.

Nguyen Thi Yen, director of Huy Hoang Trading Company in Binh Tan District, said that currently the company has to borrow at 22 per cent, and does not dare borrow more funds from the bank despite it needing more capital to expand production, Yen said.

In the short term, the rates will be applied only to particularly beneficial or loyal customers of the bank, she said. Therefore, it is difficult for small and medium enterprises to get the decreased lending interest rare of below 20 per cent that banks announced.

Banks must ease loan interest rates

According to economic experts, banks should ease the loan interest rate in order to revive the national economy and rescue businesses that are on the verge of bankruptcy.

The banking system plays a very important role in the operation of businesses, because 50 per cent of their capital comes from bank loans.

Experts also think that it is necessary to lower the loan interest rate now, because no business can survive with sky-high interest rates of 22-25 per cent. Meanwhile, several banks are trying to find ways to exceed deposit interest rates to 15-16 per cent.

Only recently, most lenders have broken the annual deposit rate cap of 14 per cent, offering rates of up to 19 per cent for deposits. It is therefore difficult for banks to lower lending rates immediately and apply the new rates to all customers, a representative of a bank said.

A bank representative said that the number of companies registering for loans has not increased from before; hence they must carefully assess a business profile before deciding to lend, to ensure that loans are given to the right businesses.

Currently, the bank is offering short-term loans to loyal customers at 20 per cent and long-term loans at 21-22 per cent, but only a few companies can get the loans, he said.

By L.Phong – Translated by T.Huong

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