Truly comprehensive finance: supporting micro and small enterprises

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Photo: Dr. Nguyen Duc Kien, former Deputy Chairman of the National Assembly's Economic Committee, former Head of the Prime Minister's Advisory Group, and Chairman of the Scientific Council of the Institute for Digital Economic Development Strategy (IDS)

How do you assess the efforts of the Government and relevant agencies in implementing the National Comprehensive Finance Strategy?

The National Comprehensive Finance Strategy, approved by the Prime Minister in January 2020, has been implemented for nearly five years and has achieved several notable successes.

The Strategy's implementation has significantly promoted digital transformation within the credit system, especially in the banking sector. With technological advancements and digital transformation programs implemented by the State Bank of Vietnam (SBV), loan approval and access processes have been considerably improved. This has resulted in faster processing times and reduced costs, creating favorable conditions for businesses.

However, the strategy has also revealed some shortcomings, particularly the disparity between different business types. While large and medium-sized enterprises, especially those involved in exports or international cooperation, have experienced substantial growth, micro, small enterprises, and household businesses have shown slower progress. This stems from the fact that larger businesses possess more resources and adapt to technology more easily, while smaller businesses face limitations in capital and human resources.

Therefore, to achieve truly comprehensive finance, we need tailored strategies for each target group. For micro, small enterprises, and household businesses, specific policy solutions are required to support their enhanced access to capital and technology.

In your opinion, what strategies should regulatory agencies adopt to support micro and small enterprises, given their persistent challenges in accessing capital?

To support micro and small businesses, the Comprehensive Finance Strategy needs to address several obstacles. Regarding capital, the Government and banks have committed to providing preferential loans. However, micro and small enterprises struggle to access these funds. This is partly due to the current credit approval process, which applies numerous safety criteria based on international standards (such as Basel II and Basel III), making it difficult for smaller businesses to qualify. Therefore, different financial creditworthiness assessment criteria are needed, tailored to the scale and characteristics of micro and small enterprises.

Furthermore, leveraging digital transformation and financial technology (fintech) is crucial for facilitating easier capital access for these businesses. Promoting contactless transactions and utilizing big data for credit scoring are essential. These methods not only expedite approval times but also reduce the cost of accessing capital.

Additionally, regulatory agencies should implement specific policies to support technology skills training for owners of small businesses. Many of them, especially those running family businesses, are accustomed to traditional business practices and lack experience in using electronic payment technology. Therefore, agencies should collaborate with training organizations to offer short courses on electronic payments and basic financial management. This will enable businesses to seamlessly integrate technology into their operations without undue financial burden.

What is the potential for digital and green transformation in Vietnam's small businesses today?

Digital and green transformation are imperative in the current era. However, for small businesses and household businesses, this transformation is far from simple.

Regarding digital transformation, many perceive it as a simple tool, but in reality, it requires substantial investment in technology, infrastructure, and human resources. To conduct digital transactions, businesses need infrastructure like payment terminals and stable internet connections.

These are costly, and many small businesses struggle to afford them. Moreover, their staff often lacks experience with digital technology, necessitating training programs and skills support.

Green transformation presents an even greater challenge, as the financial resources required to invest in green technologies are substantial. It demands significant capital and advanced scientific and technological capabilities. Developed countries have invested in green technology for decades and have established companies providing renewable energy services. However, small businesses in Vietnam are just beginning their green transition, with most technology still imported at high costs. Therefore, they need to capitalize on the advantages of being late adopters, requiring not only financial resources but also international collaboration and technology sharing.

I would also like to emphasize that during the green transition, Vietnam must proceed cautiously to avoid impulsive actions. Vietnam should implement green transformation policies flexibly, aligning with practical circumstances and capabilities, avoiding additional burdens on micro and small enterprises.

Thank you!