According to commercial banks, only 20 percent of SMEs can access bank loans, meaning 80 percent are rejected.

Dr. Nguyen Minh Tuan is Deputy Head of the Business Development Institute under the Vietnam Chamber of Commerce and Industry (VCCI), which has just conducted a survey on 282 enterprises nationwide. He confirmed that 47.74 percent of polled businesses say they consider bank loans as their main source of capital. Another 72.9 percent confirmed that they needed to borrow capital, but only 10.5 percent could borrow the sums needed, while 29.8 percent could borrow ¼ of their demand.

The percentage of bad debt incurred by SMEs at commercial banks is very low, but they still find it difficult to access bank loans. The survey conducted by the Business Development Agency under the Ministry of Planning and Investment showed that only 32.38 percent of SMEs can access bank loans, 35.35 percent find it difficult to access bank loans, while the other enterprises say they cannot borrow from banks.

Hong Phuong, the owner of an export company in Hanoi, revealed that over the last six years, since the company became operational, they have never been able to borrow from banks. When the company asks for loans, banks always say “no.” Phuong thinks that it is quite normal to be refused loans.

In fact, banks do not want to lend to SMEs -- not because they lack capital, but because they need to be conservative in providing loans. SMEs cannot obtain banks’ confidence in their financial capability and many cannot build up feasibility studies or prove their financial capability.

Tuan pointed out that the lack of a professional financial system has led to this situation. SMEs do not have financial reports that commercial banks can use to make decisions.

Associate Professor Dr. Dang Van Thanh, Chair of the Vietnam Accountants’ Association, has also cited the biggest problem as the lack of good “financial profiles”, which means reliable accurate financial reports that clearly show the “financial health” of businesses.

Nguyen Thi Huong Nga, Head of the Credit Division under ANZ Bank, explained that, to access bank loans, enterprises must always meet a lot of requirements. Banks will consider the feasibility of an enterprise’s business plan and if a company’s financial capability is healthy enough to pay bank debts. Many SMEs cannot show these factors clearly.

They make up 90 percent of companies in Vietnam, so SMEs should be a “fat land” for banks. According to Nga, the solution is that SMEs need to build up standardized accounting systems and have their finance reports audited to make financial figures become more reliable.

SMEs argue that audits are not easy for them. Nguyen Van Tan, Director of Thong Tan Food Company said many enterprises must get in through a “back door”. He questioned if companies will have to get in through “another back door” when they have their financial reports audited, because they may have to pay money to make their figures more “beautiful.”

Source: Tien phong, tamnhin.net