Lending rate jumps to 27pct

Currently, the lending rate for business and production sectors has been pushed up to 22 percent per year by some banks.

Therefore, if including all types of fee set by banks themselves, the real lending rate jumped to 27 percent per year.

According to the report from the State Bank of Vietnam, by the end of April, the lending rate increased strongly to all borrowers in three sectors: agriculture and rural areas, export, business and production and non-production.

Of which, the lending rate for agriculture and rural areas and export was from 14.5-17 percent per year (previously, it was 14.5-15 percent per year), and it was 17-20 percent per year for other business and productions (previously, it was 16-18 percent) and at 20-23 percent per year (earlier, it was 18-22 percent per year).

However, in fact, there are still some banks breaking the deposit rate cap to offer at 15-19 percent per year, leading the lending rate being pushed up to 22 percent per year for the production field. Even, some banks themselves built many types of charges, so the real lending rate jumped to 27 percent per year for small and medium sized enterprises (SMEs).

Commenting on the capital shortage situation of enterprises caused by too high lending rate, Nguyen Thi Mui, rector of VietinBank Manpower Training School, said that the capital sources at commercial banks are similar to other businesses. About 90 percent of the total capital sources of credit institution are to borrow from other economic organizations. During the past time, the total deposits of enterprises fell by more than 19 percent. Even, the fall was over 5 percent in only one month in some banks. Thus, some banks offered higher deposit rate, leading to the implicit race on interest rates.

This is one of the difficulties of SMEs, while having to deal with the high input costs as well as the other bad impacts from the latency of macroeconomics administration policies.

Reflecting the hardships of the enterprise, in a dialogue “capital solutions for business” held this morning (May 10), Vu Tien Loc, Chairman of Vietnam Chamber of Commerce and Industry (VCCI) said that pursuant to the Resolution No 11, the ministries, branches and localities have also simultaneously issued and implemented several specific documents, facilitating production and business promotion. These efforts have quickly become a positive effect, for both the economy in general and SMEs.

“However, because each policy being issue has the latency, so we need to have consistency before newly-implemented policies” Loc said.

In fact, currently, together with accessing bank loans, other capital mobilization channels such as securities, stake and bonds seem not to be promoted properly. According to the statistics from VCCI, up to 74.4 percent of enterprises want to seek capital sources via bank loans. But, not all firms can access this capital source because of the internal resources of enterprises and the shortcoming procedures of the banks.

According to the VCCI’s capital solutions, businesses can access capital through some channels with abundant capital, together with accessing bank loans with reasonable rates. In addition to bank loans, the capital sources can be also found through the form of stocks and bonds issuances, postpaid commodities purchase, financial leasing or joint venture and association.

The stock market is considered an important channel for capital mobilization of many businesses. With many different forms, such as calling capital from shareholders, individual offers for partners, employees and officials. The shares issuance has become more popular for businesses. However, the massive issuance of shares will lead to the oversupply for the market. Therefore, this channel has not promoted the effectiveness recently.

Along with stocks, bonds issuance also helped many businesses find a very effective capital mobilization channel. Through this channel, enterprises can avoid the dilution of shares, enjoy tax preferential and reduce capital use costs. In particular, if issuing convertible bonds, businesses only pay very low interest rate, even without interest.

However, according to VCCI, to ensure the success of the issuance, businesses must be transparency and credibility.

Posted by VBN on May 10 2011. Filed under Banking-Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry