Banks increase credit investment in SMEs

Among over 24,590 domestic enterprises making investments in Binh Duong, over 97% are small- and medium-seized enterprises (SMEs). The economic development of Binh Duong province in recent time contains a big contribution of SMEs. Therefore, commercial banks have concentrated capital to invest in this sector.

Facilitating SME loans

While the credit “cake” for SMEs was so modest in previous year, the credit structure of provincial banking system for this client group has been growing in recent 2 years, owing to the efforts of the government and the entire society.

Since the beginning of the year, SMEs are important subjects to preferential policies of commercial banks. Specifically, Vietinbank continues to extend the promotional program named "Cooperation for growing", which supplies a stable fund for SME’s production and business expansion by the end of Oct 2016. Meanwhile, to timely support micro businesses (enterprises with total credit needs of under VND10 billion), BIDV – Binh Duong branch launched a credit package "Accompanying micro enterprises", VND500-billion credit package named "Successful entrepreneur”...

Vietcombank – Binh Duong branch saved a budget of VND5.000 billion for SME’s loans with preferential interest rates equivalent to large businesses. Particularly, HDBank has introduced a super-preferential credit package of VND18,000 billion for individual customers and businesses. The bank applies a short-term interest rates from 6.5% / year, fixed interest rates for medium- and long-term preferential loans during the first year is only from 9.69% / year in order to help enterprises timely replenish the working capital as well as long-term capital resource for production and business projects...

In fact, not only small joint stock banks but also large-scale state commercial banks have paid much attention to SME’s customer group. Thus, many customers of individual and SME group are enable access to loans from commercial banks with reasonable interest rates.

Exploiting well potentials

According to commercial banks in Binh Duong, previously, banks were very cautious about lending loans to SMEs. The reason was that this group had limited management capacity, cash flow management, profitability, viability of business plans etc. Therefore, credit development for SMEs was not high. However, many banks have changed their thinking and approaches to this group, because they are potential customers.

According to Mr. Nguyen Thai Minh Quang, Director of Vietcombank Binh Duong, the bank has increased SME lending packages with interest rates not exceeding 7% / year. Vietcombank also supports in mechanisms and procedures. After only three working days, even within 24 hours, SMEs, individuals can receive disbursement from the bank. Therefore, the percentage of SME loans at Vietcombank Binh Duong in the last 2 years has increased rapidly. Mr Quang said, the bank has exploited well credit potentials of SME clients. In 2015, bank loan to SMEs was 12%; during the first 9 months in 2016, the percentage increased by 14.9% and could reach 18% at the end of this year. In the future, the bank will continue to pursue the goal of 30% in 2018 to this client group.

Mr. Tran Ngoc Linh, Director of BIDV Binh Duong, said, in general, newly-established enterprises had not many assets, much capital as well as relationships, orders... From these characteristics, the bank actively provide customers with advices on appropriate financial solutions, financial reporting, production projects, management models, and management methods to achieve high profitability... Since then, the bank investments could also gain high returns. "Owing to pointing out weaknesses and limitations of SMEs, becoming a friend to connect businesses with its partners, credit growth in SME sector of BIDV Binh Duong in recent years has increased significantly", Mr Linh said.

Enterprises need financial transparency

However, according to banks, to support SME development, banks are not enough. Appropriate solutions, such as credit policy, lending mechanisms, capital efficiency... from banks could only really effective, if there were supports from competent authorities, such as setting up policies to support each development phase of businesses in taxes, interest rates... In particular, itself effort of SMEs is the main reason for banks to boost lending to this group.

Mr Quang said that the current limitation of SMEs is the spontaneousness, so connection between SME community is weak. Besides, SMEs still have family-style management; most of them have no clear audit reports... If SMEs rapidly improve themselves, improve management capacity, banks will have more preferential policies to support the growth of SMEs. This is a mutual benefit to SMEs and banks.

Reported by Thanh Hong – Translated by Ngoc Huynh

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