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Banks out of loop, government fund to lend directly to startups

By Quynh Trang   January 15, 2021 | 05:30 am PT
Banks out of loop, government fund to lend directly to startups
Entrepreneurs attend a startup event in Ho Chi Minh City on December 2, 2020. Photo by VnExpress.
Startups could soon borrow at low interest rates directly from a government fund to promote entrepreneurship even as bank credit remains hard to get.

The Small and Medium Enterprise Development Fund managed by the Ministry of Planning and Investment would lend at 2.16-4 percent to small and medium-sized enterprises (SMEs), fund officials said at a forum Thursday.

In comparison, banks normally lend to businesses at around 10 percent. The officials did not however say from when the loans would be available.

The fund, established in 2013, has been mostly lending to startups through banks.

Entrepreneurs and analysts have said that getting bank loans is difficult, especially now since banks seek to prevent an increase in bad debts due to the difficulties caused by the Covid-19 pandemic.

Nguyen Trong Hieu, deputy head of the Institute of Business Studies and Development, said though the fund could not lend to more than 5 percent of the total number of SMEs in the country, it is still a major step in supporting startups, which are struggling to access bank credit.

Promoting entrepreneurship and supporting startups are what the government has been striving to do in recent years, especially in the information-communications technology sector.

Investment in tech startups in the first half of last year fell 22 percent year-on-year to $222 million due to the pandemic, according to Ho Chi Minh City venture capital firm Do Ventures.

Of the six major economies in Southeast Asia, Vietnam accounted for 16 percent of the total investment, third behind Singapore (37 percent) and Indonesia (30 percent), it added.

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