Accessing bank loans remains favorite capital mobilization channel

32% of surveyed enterprises said bank loans have still been the main capital mobilization sources during past time. This is survey result at Vietnam CFO Summit 2011 with the participation of 300 enterprises.
Accordingly, two following common capital mobilization methods are internal capital mobilization (21%) and corresponding capital from customers (17%).

Although bank credit is still the preferred channel, companies said that surging inflation and high interest rates together with the forex instability, tightening lending policy and too strict credit line of the bank are the biggest factors affecting the capital mobilization activities of companies.

Up to 40% of asked enterprises said that the biggest difficulty they face is the interest rates and other too high capital borrowing costs, and it is difficult to satisfy the conditions for loans of investors or capital providers.

In the context of the squeezed credit policy and dismal stock market currently, companies said that the most important is to restructure capital sources to efficient use of existing capital of the company, optimize the idle capital and narrow the portfolio to save costs.

Interest rates and forex rate are now very big problems for enterprises, but this is also an opportunity for companies to restructure and operate more effectively, Vu Dinh Phuc, Chief Accountant of Vilexim Investment Cooperation and Export Import Joint Stock Co said.

Assessing the current situation in Vietnam, Tom Herron, Financial director of Ernst&Young Vietnam Co said capital mobilization is very difficult as high capital costs and the lack of capital increase sources due to many companies are competing to raise capital.

“The capital cost in Vietnam is much higher than other countries. It impacts the flow of capital, because businesses will look to the markets with lower cost,” Tom stressed.

Tom advised Vietnamese enterprises need to preserve capital in tough time, but when the situation becomes favorable, enterprises should also maintain good relations with banks. In fact, some companies borrow capital with the loan rate of only 17% – 18% per year thanks to good relations with banks.

At the same time, companies should also consider other capital sources from investment funds, international stock markets and capital mobilization from small individual investors.

He also mentioned two typical cases of Hoang Anh Gia Lai and Massan recently. These firms raised capital via international channels very effectively.

However, according to the survey, only 10% of asked companies said that seeking capital from foreign investment funds is an effective means to ensure capital for business and production.

Annual CFO meeting on capital mobilization channels for enterprises was held on June 10 in Hanoi by Vietnam Report Co in collaboration with VietnamNet newspaper. – Vietbiz24

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial