Unable to access bank loans, businesses seek black credit

The bank policy on tightening credit has caused thousands of businesses’ lives to be hung by a thread, because they do not have money to keep production. As a result, many of them have to “leap in the dark” by accessing black credit at the interest rates of up to 108 percent per annum.

Tran Xuan Mai, Chair of the Nam Dinh’s Young Entrepreneurs’ Association, Director of a company specializing in making fine art products for export, said that his company has not been able to access bank loans for the last several months.

“The State says export companies can enjoy priority in accessing bank loans, but when we contact banks, they all say they don’t have capital to lend,” he complained.

Mai said that he signed an export contract worth seven million dollars before. Therefore, he had to borrow money from non-bank sources at the exorbitant interest rate of 9 percent per month, or 108 percent per annum, to fulfill the contract.

Nguyen Thi Hue Ly, Chair of the Kon Tum province’s Young Entrepreneurs’ Association, has also said that many businesses in the province have to access black market to try to survive the current difficulties.

“If the situation cannot be improved, businesses would collapse in masses, which would shake the national economy,” Hue said.

Vo Quoc Thang, Chair of the Vietnam Young Entrepreneurs’ Association, has confirmed that businesses now have to move heaven and earth to seek capital to maintain production and jobs for laborers. Thang does not agree with the experts, who advocate the policy on tightening credit and believe that it is now the right time to “filter” businesses.

Thang has warned that domestic businesses, which have to operate in overly severe conditions, would be swallowed by foreign companies.

Sharing the same view, Huynh Buu Son, a well known economist in Vietnam, said that foreign investors would take full advantage of the current situation to take over business projects at low costs.

“It may happen that a series of domestic businesses will fall into the hands of foreign investors and put under their control,” Son said.

He went on to say that the government should give support to some economic branches that it wants to encourage to develop, such as production and export, while it should not rely on commercial banks. He said banks themselves now also have problems that need to be settled.

Trinh Van Hai, Director of a business in Long An province, has proposed the government to reconsider the policy on tightening credit applied to the real estate sector. The projects on building industrial zones, for example, can bring benefits to the society, and they need to be given the priority in accessing bank loans.

The real estate sector has been considered as a type of non-production sectors. Meanwhile, the State Bank has decided that the loans to non-production sectors must not be higher than 22 percent of the banks’ total outstanding loans.

Phan Dinh Tue, Director of the Binh Trieu branch of Phuong Nam Bank, said that the State has prescribed overdose antibiotics to fight inflation, while it has not prescribed restoratives. As a result, the antibiotics have caused many side effects.

He has warned that if the State continues following the current overly tightened monetary policies, enterprises will have to scale down their production. If so, the supply of products will be limited, which will lead to an inflation boom.

A lot of listed enterprises have to lower their business targets set earlier for 2011, because they know that the targets will be unreachable in such difficult conditions.

SMC, a trade and investment corporation, has lowered the targeted steel sales from 570,000 tons to 550,000 tons, and lowered the post tax profit from 90 billion dong to 80 billion dong.

Until July 18, only five companies had their finance reports published on the official website of the HCM City Stock Exchange, and ten companies on the Hanoi Stock Exchange.- VnExpress

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial