Vo Tri Thanh, deputy head of the Central Institute for Economic Management, or CIEM, said the survey conducted in 2009 indicated about three-fourths of the local SMEs had to resort to unofficial capital sources to keep their business running.

“This reality shows that the possibility of local SMEs having access to official financing channels is very low,” Thanh said at a seminar named “Strategy for SMEs to overcome economic crisis” in the city on Wednesday.

The seminar was attended by nearly 200 business executives and held by the Association of Chartered Certified Accountants (ACCA) in combination with the Saigon Entrepreneurs Club and Doanh nhan Saigon magazine.

Thanh said the survey had been undertaken by CIEM and a foreign organization. Official capital sources referred to by Thanh are bond issues, stock markets, and bank loans.

To borrow money via bond issues, enterprises must have a reputation and secure guarantees from the authorities, so small enterprises find it almost impossible to tap this financing channel, Thanh said.

As for the stock market, it has been volatile for a long time and not all issuing enterprises have been able to succeed in raising funds on the exchanges, he added. Therefore, finances from banks are considered the basic source for local SMEs.

“The Government’s measures to support SMEs have not been really effective. In the meantime, banks in Vietnam are afraid of giving out loans to SMEs due to their problematic credit ratings,” Thanh said.

“These enterprises are mostly unable to have projects which banks see as sound and transparent. These are real challenges for them.”

Brendan Murtagh, ACCA president, shared Thanh’s view but said a survey done by the Economist Intelligence Unit found some impressive evidence of resilience among smaller businesses.

SMEs in general are still growing in terms of both revenue and employment, buoyed by the strength of customer relationships, which they see as their most valuable asset going forward, he added.

The survey was ordered by ACCA and two other internationally-active professional accountancy bodies – CGA-Canada and CPA Australia – in mid-2009 to know the precise effect of conditions on SMEs.

The Economist Intelligence Unit gave a sample of SMEs across the world on their prospects, their financing needs and the challenges of the recovery.

It is clear that weak cash positions will continue to present a serious challenge for the sector in the medium term, Murtagh said, and finance is an issue, with bank lending very weak and other providers of finance unable to compensate.

“We found that banks had often retreated to a more formulaic treatment of SMEs, taking less time to understand individual businesses and industries… The real concern was that, before the supply of finance was expected to stabilize in 2011, the recovery would remain fragile, and a very substantial share of SMEs (29%) either didn’t expect conditions to improve or could not say when that would be,” the ACCA president said.

Therefore, Thanh of CIEM said SMEs needed to meet requirements of banks and credit suppliers to be active in providing transparent information to win their trust. In addition, SMEs need to join associations to improve their relationships with other enterprises and lenders.

In addition, SMEs could make themselves easily heard when they are in an association, Thanh said.

Source: VietNamNet/SGT