For small enterprises, transparency holds key to access to funds

By Ha Truong, Hue Chi December 24, 2018 | 02:00 am PT

SMEs account for more than 40 percent of the GDP, 30 percent of the government’s revenues, and 33 percent of industrial output. Photo by VnExpress

Information transparency is one of the key factors that enable small businesses to borrow from credit institutions, according to economists.

Economist Dr Can Van Luc said 70 percent of small and medium-sized enterprises (SMEs), equivalent to nearly 400,000 businesses, find it difficult to get credit. The outstanding loans to SMEs accounted for 22-25 percent of total outstanding loans in the 2012-2017 period.

This was partly due to the small size of the enterprises, which makes it difficult for banks to use financial indicators to grade and rate them when considering loans.

"The lack of information transparency and collateral, and the infeasibility of their projects cause credit institutions to say no to small businesses," Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI), said at a recent forum on "Solutions to Promote Small and Medium Sized Enterprises".

Bui Thu Thuy, deputy director of the Ministry of Planning and Investment’s Enterprise Development Agency, said businesses need to have a mechanism to share information with banks and build a database on assets, equity capital, turnover, annual profits, operational status, etc.

According to statistics from the Association of Small and Medium-sized Enterprises, 600,000 SMEs account for 97.5 percent of the country's total number of enterprises.

Every year SMEs create over one million new jobs and account for more than 40 percent of the GDP, 30 percent of the government’s revenues, 33 percent of industrial output, and 30 percent of exports.

The total capital of SMEs is around $121 billion, accounting for 30 percent of the registered capital of all enterprises.

But despite playing an important role in the economy, SMEs are struggling to grow. A recent survey of over 504 enterprises in many fields by the VCCI found that the biggest obstacle to growth for SMEs was funding.

Loc said 60 percent of SMEs cannot access funding, which is the responsibility of the government, banks and the companies themselves.

To help businesses address this issue, the VCCI recently carried out a project called "Supporting Vietnamese Enterprises to Improve Access to Credit, Enhancing Management Capacity and Financial Transparency".