MDPF general manager Adam Sack noted banks in Viet Nam rarely lend without collateral in the form of property. "The ability of companies to borrow in order to invest, and thereby create jobs, is limited by the amount of capital in their fixed assets. However, many businesses, particularly small- and medium-sized enterprises, have considerable capital invested in movable assets such as inventory and accounts receivable," he said.

"The current regulatory and institutional environment is not conducive to banks lending against these movable assets. This project will improve regulations so businesses can access additional sources of funds to finance their growth," he added.

To make the policy of lending against movable assets possible, the Ministry of Justice has requested MPDF assistance in reviewing existing legislation pertaining to secured transactions, and recommend improvements based on accepted international guidelines. These recommendations would be forwarded to the ministry, which is now drafting amended legislation, including the Decree on Secured Transactions and the Ordinance on the Registration of the Secured Transactions.

The MPDF will also undertake a financial sector survey to analyse the nation’s present lending environment, and to identify technical, institutional and legal shortcomings in the current registry, it said.

As part of this reform process, the Ministry of Justice said it was planning to upgrade its current registry for secured transactions using a computerised network to replace its paper-based registration process. This would speed up the process of checking whether loan applicants have already secured loans against their assets, it said.

In line with accepted international practices, the MPDF is to advise the ministry on how the system should be designed and operated in order to achieve optimum efficiency. The group will also work with Foreign Investment Advisory Services and the ministry on raising awareness on the new policies and reviewing recommendations forwarded from major stakeholders, including the nation’s banks, it said.

Source: Vietnam News