Currently, most SMEs are losing revenues, facing difficulties in raw materials for production and the market for product consumption, and suffering disruptions in important production chains. Many enterprises said that the burden of premises expenses and labor costs made them suffer from capital shortages. When returning to the new normal period, the demand to add working capital has become more urgent than ever. Some enterprises focus their resources on existing orders while others create new service products based on the old platform to find new markets. The recovery strategies of SMEs are different, but to realize these strategies, it requires a new source of capital with preferential interest rates to maximize business efficiency.
However, not only in the context of the pandemic, banks have always prioritized capital for SMEs. According to the State Bank of Vietnam - Ho Chi Minh City Branch, as of the end of June 2020, outstanding loans in five priority fields were VND175 trillion, of which the outstanding loans for SMEs amounted to VND126 trillion. Mr. Tran Minh Binh, General Director of VietinBank, affirmed that SMEs are always identified as a key strategic customer segment of the bank in the long-term orientation. By the end of June this year, the total debts of SMEs customers of VietinBank reached nearly VND247 trillion, accounting for 26 percent of total outstanding loans of corporate customers, maintaining credit growth of 2 percent. The difficulty of SMEs in the Covid-19 pandemic is the lack of cash flow and this directly affects their survival. Therefore, VietinBank is deploying a series of financial solutions specifically for the segment of SMEs, such as the credit packages with a flexible fixed interest rate, the VND10 trillion loan package for supporting industry enterprises in Ho Chi Minh City, and the preferential loan interest rate program of VND3billion for start-ups. From January 23 to June 19, VietinBank disbursed to nearly 7,000 customers facing difficulties due to the influence of Covid-19 with new disbursement of VND180 trillion with interest rates decreasing by 0.5 percent per annum compared to the level before the pandemic.
Similarly, VietCapital Bank implements the preferential loan program of VND6 trillion providing appropriate loan packages, including loans to supplement working capital with interest rates from only 7.2 percent per annum. At the same time, the interest rate for overdrafts is lowered by 0.5 percent, and electronic banking services and money transfers are free of charge. Import-export businesses that need capital for large shipments not only receive preferential interest rates but are also reduced the international money transfer fees up to 50 percent. PVcomBank has also spent VND10.5 trillion with preferential interest rates from only 7.49 percent per annum; at the same time, simplified the lending process and procedures to support small enterprises, small traders, and business households to access capital faster. The leader of PVcomBank shared that many SMEs when borrowing capital, said that they had eased the burden of working capital and financial pressure and had more advantages to capture the right time for business, utilize external resources to maintain the best operation of enterprises in the difficult period.
Mr. Nguyen Phuoc Hung, Vice Chairman of Ho Chi Minh City Union of Business Association (HUBA), said that although enterprises in the basic manufacturing sector have reconnected to the supply of raw materials, they have not been able to export goods as before because the importing countries have not controlled the disease yet. International aviation has not been reopened, so enterprises in the fields of tourism, travel, accommodation, catering, and services serving foreign tourists still have to close. SMEs are affected by the pandemic at different levels, so in general, to restore business activities, most enterprises need the banks' assistance to freeze and reschedule debts, reduce interest rates without changing groups, provide new loans with low-interest rates, and especially, provide zero-percent-interest-rate loans for them to pay salaries and retain workers.
‘Enterprises want a lower interest rate level. Along with that, banks should proactively inform enterprises about their support policies so that they can recover debts by saving enterprises,’ said Mr. Nguyen Phuoc Hung.
The HUBA also proposed banks to expand support for businesses that are slightly or not even affected by the Covid-19 pandemic. Some enterprises have embarked in reviving production and business activities, so they need short-term working capital loans to supplement the shortage or interruption of cash flow; medium-term capital to restructure production, switch the sources of raw materials and products, and carry out digital transformation to reduce costs and improve business efficiency. Besides, the bank also needs to support capital for businesses that shift to use the domestic raw materials, and the Vietnam Bank for Social Policies needs to quickly provide loans with simple procedures to enterprises for them to pay salaries to retain workers. Meanwhile, Dr. Tran Du Lich stated that due to the impacts of the pandemic, many enterprises have not had the demand for loans but banks should also consider reducing interest rates further to stimulate credit. For SMEs, it is necessary to have a lower interest rate credit policy to support this group to overcome difficulties.
Nevertheless, there is also a different opinion on this matter. Mr. Ngo Dang Khoa, National Head of the Monetary and Capital Market Department of HSBC Vietnam, said that the current capital absorption capacity of the economy is slow because there is no market for products of enterprises. Many SMEs are badly affected by the pandemic, so banks should be cautious when pouring loans. Due to this warning, many banks said that they will not lower lending standards despite the abundant capital and low credit growth. On the contrary, the bank will strictly control credit quality to control the risk of increasing bad debts during the pandemic. However, many experts still say that, in the context of the complicated development of the pandemic, increasing bad debts is unavoidable. Although banks should not let bad debts hit the high level as before, they must accept bad debts at an appropriate level.
From now to the end of the year, the banking system will continue to provide sufficient and timely capital for the economy. The SBV will continue to direct credit institutions to reduce costs and profits to reduce lending rates, as well as ensure the safety and quality of the system's operations. The SBV will consider revising the Circular No.01 soon in the direction of extending the debt restructuring time until the end of 2020. New loans after January 23 - the time when the Prime Minister announced the Covid-19 pandemic - will also be considered to restructure. The SBV is willing to increase the credit limit for credit institutions from now to the end of the year to support growth when necessary.
Associate Professor – Ph.D. Nguyen Duc Thanh from the Vietnam Institute for Economic and Policy Research: Credit growth should be adjusted to below 10 percent
Credit growth in the first six months of this year shows that the capital absorption capacity of the economy has decreased and will continue to decrease in the last six months. If the SBV wants to maintain the same credit growth target of 14 percent, it will exceed the capital absorption capacity of the economy, and inflation will increase. Therefore, the SBV can adjust the credit growth target to below 10 percent to better conform to the real needs of the economy, as well as the growth rate, and inflation is likely to increase from now until the end of the year. Increasing nonperforming loans are inevitable due to the impacts of the pandemic, but that is also an objective reason. Therefore, banks need to strictly control credit quality to limit the increase of bad debts that will be difficult to handle after the pandemic is under control. SMEs themselves also need to understand the situation to find new directions with appropriate solutions, promote production and business activities when Vietnam enters a new normal period.
