Clarifying shortcomings in the implementation of credit guarantees for SMEs

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The workshop

Speaking at the opening of the workshop, Mr. Nguyen Viet Hung, Deputy Director of the Department of banking and financial institutions, said that SMEs currently account for 97% of the total number of enterprises in the country, making a significant contribution to job creation and capital mobilization for economic development and investment.

Stemming from the important role of SMEs in the economy, many mechanisms and policies have been issued to support SMEs, especially policies on credits at commercial banks and financial institutions.

In order to promote the effectiveness of credit guarantee activities for SMEs and create favorable conditions for SMEs to access loans for investment, development and business expansion, the Government has issued Decree 34/2018/ND-CP on the establishment, management and operation of credit guarantee funds in provinces and centrally run cities.

Mr. Nguyen Viet Hung said that besides the positive results, credit guarantees for SMEs at credit institutions still have some difficulties such as legal regulations, organizational model, apparatus, and charter capital.

This is also the time to review the implementation of Decree 34 to identify shortcomings to offer appropriate solutions to report to the Government and the Prime Minister to amend and supplement and improve the policies for credit guarantee for SMEs, thereby better supporting SMEs in accessing credit to expand production and business.

Reviewing the management and operation of credit guarantee funds for SMEs under Decree 34, Dr. Pham Phan Dung, USAID LinkSME project expert, said that the contents of this Decree are in accordance with legal documents including Law on Credit Institutions, Law on Enterprises, Law on Supporting SMEs, etc, helping SMEs access loans for investment and business development.

According to Dr. Pham Phan Dung, there are 25 credit guarantee funds in operation, performing the credit guarantee function for SMEs to access loans. The financial resources of these credit guarantee funds are mainly from the local budget, and interests from deposits at commercial banks, entrusted capital of authorities, economic organizations or from investment activities.

In terms of business performance, the guaranteed sales of credit guarantee funds from 2002 to December 31, 2021 is estimated at over VND4,768.31 billion with over 2,450 SMEs guaranteed for loans at credit institutions.

Regarding the results of capital mobilization activities of credit guarantee funds, Dr. Pham Phan Dung said, according to Decree 34, credit guarantee funds are allowed to mobilize capital from domestic and foreign financial and credit institutions in accordance with the provisions of law and fund’s internal regulations in accordance with repayment capacity to help these funds to raise their financial resources to support SMEs, to encourage credit guarantee funds to increase mobilization of external resources and reduce dependence on local budgets, especially in budget-restricted localities.

Some credit guarantee funds have also actively sought and mobilized other resources besides the allocated budget to supplement charter capital, however, the results have not been as expected.

To further develop the operational efficiency of the credit guarantee funds for SMEs, Dr. Pham Phan Dung proposed many solutions, in which, he suggested that the Government direct the People's Committees of provinces and cities to evaluate the implementation of Decree 34, thereby developing mechanisms and policies on credit guarantee for SMEs to maximize support for SMEs to develop production and business, enhance the operational efficiency of credit guarantee funds; review and rearrange the organizational structure so that the Credit Funds operate professionally and effectively.

In the long term, Dr. Pham Phan Dung proposed that the Government should assign the Ministry of Finance to study and develop the highest legal framework for credit guarantee funds, which is the Law on credit guarantee for SMEs.

From a local perspective, Mr. Nguyen Huu Phuoc, Deputy Director of the Credit Guarantee Fund for SMEs in Can Tho city, said that in Can Tho city, banks disbursing funds to SMEs when they are granted guarantee certificates by the credit guarantee fund are still limited.

According to the explanation of the banks, in order to get a loan, the guarantee of the credit guarantee fund is only one condition, because businesses need to meet many other conditions of the bank, even some banks do not accept guarantee certificates. However, the reason why banks are not interested in credit guarantees is that the charter capital size of the Fund is too small and the guarantee certificates are not commensurate with the loan packages.

In order to remove difficulties for the credit guarantee fund for SMEs to work efficiently, Mr. Nguyen Huu Phuoc said that it is necessary to have specific regulations on provisions and build a fund for risk reserve.

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