Ministry proposes fund to back SMEs

The Ministry of Planning and Investment’s Enterprises Development Department is planning to submit a proposal to the Prime Minister to create a small-medium-sized enterprises development fund.

Under the plan, preferential loans would be equivalent to 70 percent of total investment capital of projects. However, total value would not exceed VND30 billion.

Terms of loans would be fixed in a way that is appropriate to borrowers’ payment ability and project conditions, but they would not be beyond seven years.

Interest rates on loans from the fund would not exceed 80 percent of the rates of ordinary loans being applied by commercial banks.

It also aims to attract legal financial sources from overseas individuals and organisations including Official Development Assistance (ODA), and capital sources entrusted by domestic and overseas individuals and organisations to support the development of SMEs.

SMEs that can access preferential loans from the fund would have projects or development programmes involved in industries that are given investment priority by the Government.

The loans would help them develop production and trading activities and improve competitive ability.

Le Quoc Khanh, director of the Nam Ha Joint Stock Company, say the establishment of the SME development fund is good news for SMEs since many of them are facing difficulties, particularly in capital shortages.

Major enterprises need large amounts of capital and little is left over to lend to smaller companies, according to senior economic expert Pham Chi Lan.

MPI’s Enterprises Development Department, citing study results, said that a SME development fund is necessary as SMEs are facing many capital-related problems.

The submitted proposal includes results from a survey of the Japan International Cooperation Agency (JICA), which showed that 80 percent of SMEs did not receive credit support.

Although the Credit Guarantee Fund at many localities was set up in 2002, only a few SMEs have had access to this financial source.

High lending interest rates and difficult lending conditions are the biggest obstacles that have prevented SMEs from bank loans, while most SMEs expect to have easier access to loans from credit organisations.

A representative of the Enterprises Development Fund said that if the SME Development Fund is established, it will create an additional financial channel for SMEs in addition to current traditional sources.

The fund would also be a State-owned, large-scale financial institution to ensure that it can gather financial sources to support SMEs at home and abroad in line with the laws.

VNA/VOV

Tags: Vietnam companies, Vietnam enterprises, Vietnam SMEs