Loans are cheaper, but businesses are still frustrated

Many commercial banks are offering to lend dong to export companies at interest rates of 12-12.5 percent per annum only, but businesses still claim the loans are out of reach.

To borrow money at such low rates, businesses have to meet certain requirements. Most especially, they must commit to sell foreign currencies they earn to the banks.

Nguyen Duc Thanh, Director of Tan An Farm Produce and Food Export Company in Long An province, maintained that the company can borrow capital from Vietinbank at 12 percent per year. Previously, when the dong interest rate stood at 16-17 percent, he had to borrow money in dollars to cut expenses.

Nguyen Tung Duong, Finance Director of Go Dang Company in Tien Giang province, confirmed that his company borrowed capital from a foreign bank at 12 percent. Duong added that the company does not have to sell foreign currencies from export contracts to the bank.

In some other cases, banks offer low interest rates, but they do not commit to fix the rates until the contracts mature. Hua Phuc Vinh, General Director of Dong Thap Muoi Import-Export Company, admitted that many businesses can borrow money at 12.5-13 percent per annum, but the banks do not promise to set interest rates for the whole loan period.

A wood furniture company director claimed that not all businesses can borrow at the low interest rate, because they must meet many requirements. For example, they need to have credit relations with the banks for at least two years in addition to selling foreign currency earnings to the banks. Export companies without earnings in dollars, cannot borrow at 12 percent per annum.

A garment export company director in HCM City explained that, at first, he could borrow money at the low interest rate, but, in early July 2010, the bank decided to raise the rate to 15 percent, even though he tried to show the bank that he borrowed money to buy materials to fulfill garment export orders.

Meanwhile, the deputy director of a steel pipe company that exports to the US argued that, despite the drop, rates are still high. Banks have been told to ease loan interest rates, but they still cannot without cheap capital sources.

A banker in HCM City maintained that they have just eased lending interest rates slightly over the last 10 days. In general, capital costs are still high, averaging 11.5 percent. Recently depositors, anticipating that interest rates would fall, chose to make longer-term deposits, but he added that banks still need one or two months more to ease interest rates further.

Bankers argue that they have been trying their best to arrange cheap capital for export companies. Eximbank has decided to reserve two trillion dong to lend to export firms with interest rates of 12 percent per annum. To date, the program has disbursed 500 billion dong over the last month.

Asia Commercial Bank (ACB) is lending dong at 13.5 percent and dollars at 3.8-4 percent to companies that commit to sell foreign currencies to the bank.

Do Minh Toan, Deputy General Director of ACB, commented that they plan to slash lending interest rates for export companies to 12.5 percent in order to encourage businesses to borrow capital for expansion in the last half of 2010.

Tags: loans, Vietnam finance, Vietnam financial

Posted by VBN on Jul 19 2010. 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