Small firms in Vietnam lack access to bank credit, business group says

By VnExpress   November 23, 2016 | 06:26 pm PT
Only 30 percent of small and medium-sized companies manage to take out loans from banks.

Vietnam’s 600,000 small and medium-sized enterprises continue to grapple with limited access to credit even though they play an important role in the economy and account for 52 percent of total employment, the Vietnam Chamber of Commerce and Industry (VCCI) said.

Only 30 percent of private businesses of small and medium sizes, better known as SMEs, have managed to secure bank loans, according to latest data from VCCI, an influential group that represents the business community in the country.

Statistics also showed that the amount of credit provided to SMEs only accounted for 3 percent of all outstanding loans at local banks.

There is not much readily available information to help banks gauge a small business’s creditworthiness, Rajeev Chalisgaonkar, the global head of business banking at Standard Chartered, told a workshop on Wednesday.

Although there are some banks that focus on SMEs, they really are not able to offer financing to early-stage companies which often don’t have a track record of reliable annual revenues or a history of good credit, he said.

Limited access to finance is a major constraint to the growth of private companies, besides other obstacles such as management or technological issues, said VCCI’s Vice President Vo Tan Thanh.

There is a growing recognition of the importance of the private sector, particularly of SMEs. The government is expecting that, by 2020, private companies will contribute up to 49 percent of gross domestic product.

In order to improve access to finance for small businesses, the Ministry of Planning and Investment has proposed a series of initiatives to support small businesses. If the country's lawmakers sign on, an estimated 550,000 SMEs will benefit.

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