HCMC businesses struggling with high-interest loans

Most small- and medium-sized enterprises (SMEs) in Ho Chi Minh City are in need of capital but find it hard to obtain loans, especially because of high negotiable interest rates for medium- and long-term loans, a city official has said.

Most small- and medium-sized enterprises (SMEs) in Ho Chi Minh City are in need of capital but find it hard to obtain loans, especially because of high negotiable interest rates for medium- and long-term loans, a city official has said.

Speaking at a meeting with business associations on April 7, deputy director of the HCMC Department of Industry and Trade, Quach To Dung, complained that the Vietnam Development Bank (VDB) has granted more credit guarantees to public projects than to SMEs, of which 80 percent need loans to upgrade technologies or expand operations.

Workers process shrimp for export at Cau Tre Export Processing JSC in HCMC. Most businesses, especially SMEs, find it hard to afford loans to maintain and expand operations because of high lending interest rates. (Photo: Tuoi Tre)
Workers process shrimp for export at Cau Tre Export Processing JSC in HCMC. Most businesses, especially SMEs, find it hard to afford loans to maintain and expand operations because of high lending interest rates. (Photo: Tuoi Tre)

Unaffordable interest 

Pham Ngoc Hung, deputy chairman of the HCMC Business Association, agreed, saying many company members of the association are facing difficulties in getting loans, especially medium- and long-term ones.

Procedures for obtaining such loans have become more complicated as many commercial banks now apply more formalities than previously. Moreover, such procedures are different at each bank, causing confusion for borrowers, he said.

Currently, most businesses, especially SMEs, are suffering higher input costs while they are unable to raise prices of their goods. This is due in part to a slowdown of consumer spending, many trading companies said.

Nguyen Van Truc, general director of the Saigon Agricultural Corporation, said, “The cost per kilogram of a pig is VND32,000-33,000 but the selling price of pork products is almost the same.”

“This situation is serious because if trading companies fail to make a profit they cannot survive,” he said.

A representative from Saigon Co.op said that while the retail chain has been taking measures to contribute to the stabilization of market prices, negotiable lending interest rates at many commercial banks have increased too sharply.

“High interest rates are eating away gross profit earned by businesses,” the representative lamented.

Nguyen Quang Tien, general director of the Ben Thanh Corporation, warned that investment plans of many companies would fail if the negotiable lending rates continue at 17-18 percent per year.

Interest rate proposed at below 12 percent

The director of the HCMC branch of the State Bank of Vietnam, Ho Huu Hanh, said that four leading banks: Foreign Trade Bank, Industrial and Commercial Bank, Investment and Development Bank, and Agriculture and Rural Development Bank, have pledged to lower lending interest rates to 14 percent per year in the next week.

Customers perform transactions at a commercial bank in HCMC. To ease cost burdens on businesses, the country’s four leading banks say they will reduce interest rates to 14 percent per year next week. (Photo: SGGP)
Customers perform transactions at a commercial bank in HCMC. To ease cost burdens on businesses, the country’s four leading banks say they will reduce interest rates to 14 percent per year next week. (Photo: SGGP)

Meanwhile, many delegates recommended that negotiable lending interest rates on medium- and long-term loans be reduced to less than 12 percent, and that priority and lending incentives be given to companies that produce goods for export.

At the same time, loans in foreign currencies should also be preferentially offered to importers of materials or equipment that are essential for domestic industries. The VDB should extend its scope of credit guarantee, many delegates added.  

At the macroeconomic level, national financial and monetary policies must be more strategic and viable for the long term to create confidence in businesses as well as the public.

Ms. Nguyen thi Hong, vice chairwoman of HCM city People's Committee said that city authorities would work to resolve issues within their jurisdiction and said other issues beyond its authority would be considered at a meeting on April 10 with the city, the SBV, and the ministries of Finance, and Industry and Trade.

Along with the central government, city authorities are striving to restrain inflation and maintain social security. As part of these efforts, authorities will arrange meetings with a number of businesses to seek solutions to removing obstacles they face.

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