Vietnam - Enterprises not satisfied with interest rate cuts

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 >>  Interest rates may be eased in next few months

Despite the recent fall in interest rates, many enterprises are still finding it hard to get loans from banks because of strict requirements from creditors.

Nguyen Van Hien, Director of NVH Electrical Equipment Joint Stock Company, said, ‘We are not really happy with the State Bank of Vietnam (SBV)’s recent decision to lower the yearly deposit interest rate to 13%, as sharp interest rate increases come more frequently than any cuts.”

Even though many banks have announced that they would slash lending interest rates to more attractive levels, lending rates remain high, affecting businesses in need of capital.

After taking a close look at new interest rates at several banks in Hanoi, Hien has discovered that most banks he studied are applying a lending interest rate of 20.5% per year, higher than banks’ recent claims of from 16.5%-17%.

“With the actual interest rate still so high, many companies are struggling just to pay off the interest on their loans, let alone make a profit. In my business activities, I've decided to borrow in USD, but then convert the profits to VND afterwards to maximise profits," he said.

Mai Hong Bang, General Director of Vinavico Minerals Industry Joint Stock Company, said in order to get a bank loan, businesses must meet very strict requirements set by banks, including a collateral rate of 6 to 10.

Bang also noted that, while banks announced lending interest rates of between 16% and 17% per year, enterprises have had to borrow at actual interest rates upwards of 18%-19%.

Nguyen Dinh Ngoc, Director of Ngoc Bich Limited Company, complained, “We're having great difficulty in getting credit from banks because of such strict requirements and a lot of red tape. In some cases companies are not able to meet their financial obligations due to bank procedures."

Several small enterprises have come out and said that they were not able to secure loans because of the high interest rates. They say that 20% is simply not manageable for them.

Cao Sy Kiem, Chairman of the Vietnam Association of Small and Medium-Sized Enterprises, said the cut of 1% in the deposit interest rate is rather modest, and hasn't proven to be sufficient to solve current liquidity problems for businesses.

“In order to facilitate further decreases in the lending interest rates, the SBV should take more drastic measures in the next few months,” Kiem recommended.

In his opinion, when the national inflation rate can be lowered to 9%, and deposit interest rates are cut to 11%, the annual lending interest rate would fluctuate between 14%-15%. This, he said, would make it much easier for enterprises to do business.

Nguyen Hien | dtinews.vn

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