In a proposal sent to the Prime Minister in mid-August, the Board for Private Economic Development Research (IV Board) of the Government Advisory Council for Reforming Administrative Procedures proposed to relax the credit limit for small and medium-sized enterprises ( SMEs). Such a crunch through the State Bank of Vietnam (SBV) not only affects real estate businesses, but also affects capital flows from local manufacturers.
Numerous difficulties in approaching credit were cited by the IV Board after regular surveys of 16 associations, including those involved in steel, timber, electronics, motor vehicles, logistics and Vietnamese Association of Seafood Exporters and Producers (VASEP).
Nguyen Hoai Nam, Deputy Secretary General of VASEP, said that despite seafood producers’ positive performance and export value in the first half of the year, they face many problems.
“As supply chains continue to be interrupted and transportation and material costs increase, if the selling price of seafood products increases, we cannot maintain export markets and stocks increase. . In this country, bank credit is tightening. Unless companies get loans from banks, they cannot continue their operations,” Nam said.
The situation would be common to most sectors. In construction companies, lack of capital and credit crunch lead to many burdens.
“In construction, unpaid debts are common due to complicated acceptance and disbursement procedures. Without approaching credit loans from banks, contractors have no money to advance for workers and materials while they wait. disbursement from investors,” said Nguyen Quoc Hiep, chairman of the Vietnam Construction Contractors Association.
Business association representatives are grappling with lack of working capital due to the prolonged pandemic and very little income while having to pay debts, interest on bank loans and other costs to maintain and operate the business, in addition to increased input costs for manufacturing.
VASEP’s Nam said they are facing a drop in the number of exit orders. Tighter global financial conditions and supply chain disruptions have reduced growth prospects for the global economy, so demand for Vietnamese exports is much weaker in many markets.
“Additionally, currencies like the yen and the euro are currently in trouble, so companies exporting to the EU or Japan suffer disadvantages due to receiving foreign currencies that are devaluing sharply,” added Name.
According to the Ministry of Planning and Investment (MPI), the private sector is about to recover. The number of newly created businesses and businesses resuming operations increased sharply in the first seven months of 2022, to around 89,400 (up 17.9% year-on-year), and more than 44,300 businesses have resumed operations (up 49.7% YoY), respectively. However, they still need a support raft.
Nam added that SMEs find it difficult to approach loans because their collateral is weak and banks often do not prioritize them. Cash flow is also weak and unstable, which prevents companies from meeting banks’ conditions to access loans, preferential loans and other support for SMEs.
“Even for businesses that don’t struggle with these issues, in the current environment where the SBV tightly controls credit growth targets, commercial banks no longer have room for business lending,” Nam explained. .
The IV Board has reported to the government that many SMEs and business households, which account for 98% of total ongoing businesses, will go bankrupt due to lack of money for employees and capital for operations and investments.
“SMEs play the role of satellite enterprises supporting large enterprises in the process of implementing the country’s key projects,” said Truong Gia Binh, Chairman of FPT Group and Head of IV Board.
“Therefore, it is necessary to control the inflation rate reasonably to loosen the credit line and support businesses. Otherwise, there will be a scenario that these companies will go bankrupt next year, leading to an economic recession. It is more dangerous than inflation,” Binh stressed.
According to the latest data announced by the SBV, credit growth for the entire banking sector at the end of July reached 9.27% compared to the end of 2021 and increased by 16.61% year on year, although more than the 6.47% of the first seven months of last year
The IV Board has proposed that the government maintain business support policies in terms of taxes, fees and credits, to reduce the cost burden on business. In addition, the implementation and disbursement of economic stimulus programs should be accelerated, including the VND 40 trillion ($1.74 billion) additional interest compensation program and the investment program in infrastructure development worth VND 113 trillion ($4.9 billion) to create better conditions for economic recovery.
This council also proposed to the SBV to raise the credit growth ceiling for commercial banks to promote the production and service sectors.