"Thirst" for capital in the middle of the price vortex

VCN - From the beginning of the year until now, the price of many kinds of goods and raw materials for input production has increased, causing the operating costs of enterprises to be increased, and a difficult "problem" of capital for re-production becomes more and more difficult.
The high cost of raw materials and logistics has affected the profit margins of many textile and garment enterprises. Illustration: H.Diu
The high cost of raw materials and logistics has affected the profit margins of many textile and garment enterprises. Illustration: H.Diu

Trying to maintain production

As reflected by textile enterprises, in the first five months of 2022, the average price of imported yarn increased by 10% over the same period last year, due to the increase in cotton and oil prices, along with high anchoring logistics costs. This leads to an increase in fabric costs, which significantly affects the gross profit margin of domestic manufacturing companies - especially those that have the majority of FOB orders (manufacturing orders in the form of purchasing raw materials - semi-finished products).

Similarly, with wood industry enterprises, tensions between Russia and Western countries have led Russia to issue a ban on exporting logs to European countries and the US, leading to a shortage of raw wood supplies globally, leading to an increase in the price of raw materials. According to Trading Economics, the price of American lumber has increased by 25% compared to the beginning of the year, leading to a decrease in the value of imported wood materials in Vietnam compared to the previous year. Experts at VnDirect Securities Company forecast that the gross profit margin of domestic wood and furniture companies will continue to decrease by 0.4-0.6 percentage points over the same period in 2022, due to input materials. input and increased logistics costs.

Also on this issue, according to Ly Kim Chi, Chairman of Ho Chi Minh City Food and Food Association, the price of input materials for production is increasing, with some items increasing by more than 40%, along with high gasoline prices. The record makes it difficult for businesses not only in terms of supply but also in terms of capital to buy raw materials, as well as to pay production costs. Ly Kim Chi for example, if before, businesses only needed about VND100 billion to stockpile raw materials, now the cost increases, pushing the reserve money by 50%, which means VND150 billion is needed. Therefore, businesses are in dire need of more capital for production, because if businesses apply the price, it will certainly push up the selling price of products, leading to pressure on inflation.

"Food and food businesses are facing many difficulties, must use other capital mobilization channels to maintain production up to this point," Ms. Chi emphasized.

In fact, food and food are essential commodities. If the price increases, it will affect purchasing power and affect inflation. Therefore, many businesses said that in the past time, the food and food industry maintained the price level, implemented stabilization programs, and prevented inflation from rising. Although the food and food industry is enjoying preferential interest rates, according to businesses, it is not possible to fully offset the increasing costs.

A representative of the transport-tourism industry said that as the business's capital source is mainly from shareholder loans or prepaid tour customers, the business has no collateral, so it has to borrow money. Unsecured loans with interest rates of up to 13-14%/month, this interest rate is only enough for businesses to hold on, to ensure sufficient vehicles and employees' salaries, so it is difficult to ensure profits in the current context.

On the other hand, another problem today is the fact that banks with money cannot lend to businesses because they are "stuck" in the credit growth limit (room). Therefore, many banks are "waiting" for the State Bank of Vietnam (SBV) to soon extend the credit room so that banks have more room to disburse credit packages, including preferential credit.

Need to clear the bottleneck on capital

SBV has issued a circular guiding the 2% interest rate support from the state budget according to Decree 31 of the Government. Therefore, many banks have started to implement this support package and have been approved by the SBV to provide credit support for businesses, cooperatives and business households. Specifically, Agribank announced that it has approved the interest rate support limit of 2%/year with an expected size of VND2,500 billion in 2022 for those eligible for interest rate support. ABBank approved VND264 billion to support interest rate reduction. Correspondingly, there will be about VND13,000 billion of outstanding loans that will be preferential. With VietinBank, about 30% of the total credit size of banks in the group can be reduced interest rates according to Decree 31. Therefore, this bank is set aside VND7,000 billion to support interest rate reductions this year and next year.

However, access to capital is still a big problem for businesses. A representative of Tan Quang Minh Production and Trading Co., Ltd. said that accessing this capital is very difficult, even with the 2% loan interest rate support program, businesses do not know how to continue. reachable.

At the recent question-and-answer session at the National Assembly, Governor Nguyen Thi Hong said that small and medium-sized enterprises account for 97% of the total number of businesses in the economy. This group of businesses has many limited conditions such as finance, management ability, and brand name, so the credit rating is not high. Credit institutions must assess their credit in order to offer an appropriate interest rate, the interest rate for low credit enterprises must be higher than that of high credit enterprises. Businesses with many limitations will not be eligible to borrow capital from banks, because credit institutions must follow the principle of borrowing capital, and customers must ensure the ability to repay, because the loan is also mobilization of the people.

Facing current difficulties, businesses still need more specific and preferential policies to increase access to capital. Ly Kim Chi suggested that commercial banks have the policy to re-evaluate the value of collateral to increase the disbursement limit, helping businesses have more capital, especially those that do well. A representative of a food production enterprise said that businesses need to get long-term loans, banks to increase lending levels and implement policies faster so that businesses can have more capital for production and business.

Along with that, banks are also "eagerly" proposing the SBV to increase the credit room or maybe have policies to support banks, excluding loans under the 2% interest rate support program from the credit room calculation. Mr. Nguyen Quoc Hung, General Secretary of the Bankers Association, said that the capital needs and growth of credit room of banks are very large. Therefore, it is necessary to balance the inflation level to provide a reasonable credit growth threshold, otherwise it will be difficult for banks when conditions are sufficient but cannot disburse due to the lack of room.

By Binh Nam/Huu Tuc

Related News

Strengthening the financial “health” of state-owned enterprises

Strengthening the financial “health” of state-owned enterprises

VCN - The state economy plays a key role in the socio-economic development process, but it is necessary to strengthen the financial health and competitiveness of state-owned enterprises (SOEs).
Public investment spending up 1.8% in first 10 months of 2024

Public investment spending up 1.8% in first 10 months of 2024

VCN - Public investment from Vietnam’s state budget saw steady growth in the first ten months of 2024, reaching 64.3% of the annual target—an increase of 1.8% compared to the same period last year.
“New path” for small and micro enterprises to access capital

“New path” for small and micro enterprises to access capital

VCN - Small and micro enterprises and business households are often classified as high-risk, so banks are not interested in granting credit. Therefore, improving efficiency and promoting the application of technology for financial inclusion is the way for these enterprises to access capital.
Vietnam

Vietnam's economy is recovering well

VCN - According to Dr. Nguyen Quoc Viet, Deputy Director of the Vietnam Institute for Economic and Policy Research (VEPR), by the end of the third quarter of this year, Vietnam's economy had recovered relatively well amid optimism about the overall growth of the world economy in late 2024 and 2025.

Latest News

Monetary policy forecast unlikely to loosen further

Monetary policy forecast unlikely to loosen further

It will be difficult for the State Bank of Vietnam (SBV) to further loosen monetary policy due to a rising USD/VNĐ exchange rate pressure, experts said.
World Bank outlines path for Vietnam to reach high income status

World Bank outlines path for Vietnam to reach high income status

The World Bank (WB) has released a report which explores how Vietnam can upgrade its participation in global value chains to become a high-income country by 2045.
Strictly control public debt and ensure national financial security  2025

Strictly control public debt and ensure national financial security 2025

VCN – In order to achieve goal of strictly managing public debt and maintaining security and safety of the national financial system in 2025, it is necessary to ensure the borrowings and repayments of public debts is within the approved estimate; closely monitor public debt indicators to ensure that they are within the ceiling and warning thresholds approved by the National Assembly.
Revising the title of a draft of 1 Law amending seven finance-related laws

Revising the title of a draft of 1 Law amending seven finance-related laws

VCN - On November 19, 2024, the Standing Committee of the National Assembly (SCNA) discussed amendments and refinements to the draft of a law revising seven existing finance-related laws. Concluding the session, Vice Chairman of the National Assembly Nguyen Duc Hai emphasized the need for the Government to direct the drafting body and relevant agencies to collaborate closely to finalize a persuasive and widely supported report, ensuring the quality of the draft law for the National Assembly's consideration and decision.

More News

Transparency evates the standing of listed companies

Transparency evates the standing of listed companies

VCN - According to the Hanoi Stock Exchange (HNX), the number of companies placed under warning, control, or restricted trading on the listed and registered markets has increased over the past two years compared to 2022.
State-owned securities company trails competitors

State-owned securities company trails competitors

Contrary to the outstanding performances in the banking sector, the securities subsidiaries of major banks have yet to fully leverage their potential, despite numerous inherent advantages.
U.S. Treasury continues to affirm Vietnam does not manipulate currency

U.S. Treasury continues to affirm Vietnam does not manipulate currency

VCN - In its latest report, the U.S. Department of the Treasury has positively assessed Vietnam's monetary policy, reaffirming that Vietnam does not engage in currency manipulation.
Exchange rate fluctuations bring huge profits to many banks

Exchange rate fluctuations bring huge profits to many banks

Net profits from the foreign exchange trading segment of many banks have gained positive results thanks to a strong USD/VNĐ exchange rate fluctuations this year.
A “picture” of bank profits in the first nine months of 2024

A “picture” of bank profits in the first nine months of 2024

VCN - Pre-tax profits for banks during the first nine months of 2024 remained positive, exceeding 200 trillion VND, solidifying the sector's position as a market leader.
Many challenges in restructuring public finance

Many challenges in restructuring public finance

VCN - Restructuring public finance is an important step to improve state financial management, ensure resources are allocated reasonably and effectively, contributing to the country's sustainable development. In addition to the achieved results, the process of accelerating public finance restructuring also faces many pressures.
Tax declaration and payment by e-commerce platforms reduces declaration points and compliance costs

Tax declaration and payment by e-commerce platforms reduces declaration points and compliance costs

VCN - E-commerce platforms that declare and pay taxes on behalf of traders not only help to reduce the number of tax declaration points but also reduce the cost of compliance with administrative procedures for the whole society because only one point as the e-commerce trading platform implements tax deduction, payment and declaration on behalf of tens, hundreds of thousands of individuals and business households on the platform.
Disbursement of public investment must be accelerated: Deputy PM

Disbursement of public investment must be accelerated: Deputy PM

Deputy Prime Minister Ho Duc Phoc has called on ministries, agencies, and localities to accelerate the disbursement of public investment from now until the year-end and further tighten investment management.
HCMC: Domestic revenue rises, revenue from import-export activities begins to increase

HCMC: Domestic revenue rises, revenue from import-export activities begins to increase

VCN - The results of State budget revenue in HCMC in the first 10 months of 2024 are estimated to increase by 10% over the same period last year, of which the highlight is that revenue from import-export activities has begun to increase.
Read More

Your care

Latest Most read
Monetary policy forecast unlikely to loosen further

Monetary policy forecast unlikely to loosen further

It will be difficult for the State Bank of Vietnam (SBV) to further loosen monetary policy due to a rising USD/VNĐ exchange rate pressure, experts said.
World Bank outlines path for Vietnam to reach high income status

World Bank outlines path for Vietnam to reach high income status

The World Bank (WB) has released a report which explores how Vietnam can upgrade its participation in global value chains to become a high-income country by 2045.
Strictly control public debt and ensure national financial security  2025

Strictly control public debt and ensure national financial security 2025

VCN - According to the plan for borrowing and repaying public debt and foreign debt of the country in 2025, the total borrowing demand of the Government in the year is expected to be at VND 815,238 billion, an increase of 20.6% compared to the Government'
Revising the title of a draft of 1 Law amending seven finance-related laws

Revising the title of a draft of 1 Law amending seven finance-related laws

On November 19, 2024, the Standing Committee of the National Assembly (SCNA) discussed amendments and refinements to the draft of a law revising seven existing finance-related laws.
Transparency evates the standing of listed companies

Transparency evates the standing of listed companies

According to the Hanoi Stock Exchange (HNX), the number of companies placed under warning, control, or restricted trading on the listed and registered markets has increased over the past two years compared to 2022.
Mobile Version