Recovery underway, businesses need to accelerate credit

	Credit growth quota policy needs to ensure safety of banking system
	With the recovery momentum returning, businesses need to speed up credit

Many businesses are striving to capitalize on economic opportunities for recovery.Photo: H.Diu

Striving for a credit growth of about 5% in the first six months of the year

At the recent regular government meeting, slow credit growth (only 2.41% by the end of May) and difficulties in accessing credit were among the shortcomings and limitations identified by the Prime Minister. Therefore, the head of the government has continued to demand proactive, flexible, timely, and effective monetary policy management. This management should be coordinated synchronously, harmoniously, and tightly with a reasonably expansive fiscal policy, focusing on priorities. Simultaneously, it is necessary to facilitate access to credit for businesses and individuals and to continue reducing lending rates.

The issue of stimulating credit growth has been frequently mentioned in the directives and management actions of the Government and the State Bank of Vietnam (SBV) over the past several months. Many banks have indicated that although deposit rates are trending upwards, lending rates are still maintained at a low level. With abundant liquidity, banks are always eager to find lending opportunities.

Currently, banks are lending to business customers at an average interest rate of 4-6%/year, and to individual customers at 6-8%/year. At the same time, banks are launching many preferential credit programs, tailored to specific sectors and industries, thereby facilitating easier access to credit for businesses.

Additionally, two major economic "locomotives" are promoting a series of preferential credit programs, connecting banks and businesses to create a pull for credit throughout the country, aiming to double the national average credit growth results.

In the capital city of Hanoi, by the end of May 2024, the total outstanding credit is estimated to have reached over 3.8 million billion VND, an increase of 5.09% compared to the end of 2023. The Hanoi Statistics Office reports that credit institutions in the area have introduced many preferential credit programs and have implemented flexible interest rate policies.

In Ho Chi Minh City, credit growth by the end of May is estimated to be 3.61 million billion VND, an increase of 4.5% compared to the end of 2023. However, the challenge remains in how banks and businesses can meet within the credit relationship, as numerous barriers to accessing credit still exist, especially for small and medium-sized enterprises or businesses that have previously faced difficulties and losses.

For businesses to have an effective business plan to access loan capital

According to Mr. Le Tien Truong, Chairman of the Vietnam Textile and Garment Group (Vinatex), market demand is gradually recovering, which helped increase textile and garment exports in Q1/2024 by over 10% compared to the same period last year. For further recovery, businesses need resources and capital to implement their production and business plans. Meanwhile, Mr. Truong mentioned that the production and business results in 2023 were poor, so the trend of providing credit capital in 2024 for businesses is lower. For example, in the yarn industry, yarn production and business enterprises have been approved for a credit limit 20% lower than in 2023, leading many businesses to face a shortage of working capital to import raw materials and organize production.

Emphasizing the losses if the yarn industry is not supported in its recovery, the Chairman of Vinatex clearly stated that global markets such as China, Bangladesh, and India are ready to compensate for the yarn volume that Vietnam loses. If not quickly recovered, the Vietnamese yarn industry will lose its market dominance. Therefore, he suggests that commercial banks should collaborate closely with businesses, sit down, and work in detail with them to ensure that the profit margin on revenue of each unit, business, or order is better than before, and that the number of orders this year go beyond those of last year, in order to approve suitable credit limits.

Additionally, Dr. Mac Quoc Anh, Permanent Vice Chairman and Secretary-General of the Hanoi Small and Medium Enterprises Association (HANOISME), has frequently suggested that small and medium-sized enterprises in Hanoi, which account for 98.2% of the total number of registered businesses, create jobs for 55.1% of the total labor force and contribute over 40% GRDP to the city. However, many small and medium-sized enterprises, especially micro enterprises, still face difficulties in loan procedures when commercial banks require collateral, while many in this sector lack strong collateral conditions. Regarding collateral conditions, Ms. Nguyen Hai Binh, CEO of STP Group Corporation, mentioned that business assets are tied to water areas, while the regulation is that collateral must be land-attached assets.

Given the above situation, representatives of business associations and businesses have expressed a desire for banks to study suitable unsecured lending mechanisms or lending based on feasible business plans to make it more convenient for businesses to access capital.

In response to the difficulties of businesses, the SBV has directed banks to actively review projects to ensure timely supply of credit for feasible projects, accelerate loan approval, apply flexible measures, and use forms of collateral for loans that comply with suitable regulations. They are also promoting the diversification of bank credit products and services. Even the SBV has required that banks not let businesses with effective business plans that fully comply with legal regulations be unable to access loan capital and to regularly organize bank-business connection programs.

However, to boost and achieve credit growth targets, experts believe that it is necessary to implement a range of solutions to support economic growth and macroeconomic stability. Among these, it is necessary to support businesses in market outlets, improve the business environment in a favorable direction, and combine preferential mechanisms and policies for businesses investing in and applying new technologies. This approach will help businesses not only recover but also create conditions for effective capital absorption, avoiding the risk of bad debts.