VietNamNet Bridge – Banks have announced that they will restrict the lending to non-production sectors. However, the policy has narrowed the banks’ door to small and medium enterprises (SMEs) and they have to borrow money under the mode of consumer credit.
Commercial banks have admitted that a lot of SMEs have to borrow money under the mode of consumer loans in order to make short term payments or maintain their production and business.
Luu Hai Van, the Business Director of a garment company, said that now is a transitional season, while consumers tend to spend less because of their fear for high inflation, the company’s sales have been going down, and capital has been “buried” in the inventory products. Some partners have agreed to allow the company to delay payment, but the company has to pay workers on schedule. Sometimes, the company has to move heaven and earth to arrange money to pay to workers.
Van said that as banks have set very strict requirements on the businesses that want to borrow money to fund production, her company has to borrow money in the form of consumer loans, though consumer loans have much higher lending interest rates than production loans by 3-4 percent per annum.
General Director of Eximbank Truong Van Phuoc said that consumer loans account for 18 percent of the total outstanding loans of the bank, equal to 1200 billion dong. Phuoc thinks that the number of enterprises which have to borrow money in the form of consumer loans is not high because of the small volume of capital reserved for consumer loans.
Meanwhile, the director of a finance company in Me Linh district in Hanoi, said that its main clients, who come to borrow money, are enterprises. The enterprises mostly ask for consumer loans, from hundreds of millions of dong to several billions of dong, to make short term payments.
“We have to mobilize capital at high interest rates, therefore, we have to lend at high interest rates, even though this will bring risks to the both sides,” he said. “However, the enterprises cannot access bank loans, and they need capital to maintain production”.
The director went on to say that the demand for loans is still very big, but the company has slowed down disbursement as requested by the central bank.
In fact, it is not easy for SMEs to access loans from banks, even though enterprises accept to borrow under the mode of consumer loans and pay higher interest rates. Many banks have set stricter requirements on borrowers. For example, the Asia Commercial Bank (ACB), for example, has decided that it will only provide consumer loans (with no mortgaged assets required) to regular state employees, or workers of big enterprises, who have a net monthly income (the income deducts the expenses) of six million dong and higher. Each of those clients can borrow 300 million dong at maximum, which is equal to eight months of income.
“It is now more difficult to get consumer loans,” a credit officer of the Ba Dinh Branch of the Bank for Development and Investment BIDV said. His bank now only provides consumer loans to those people who can show car or house contracts.
Since the banks’ doors are narrower for SMEs, they have been trying to seek capital from finance companies, where conditions to borrow capital prove to be more open. However, when SMEs seek capital from finance companies, they well understand that they will have to pay interest rates 2-3 percent higher than that offered by banks. Prudential Finance Company, is offering consumer loans with no mortgaged assets required at the interest rate of approximately 23 percent (the lending limit is between 60 million and 190 million dong). If borrowers pay debts before the debts mature, they will bear the fine of 2-4 percent. As such, the financial burden on borrowers.
An officer of a finance company has revealed that hundreds of applications for borrowing money have been put on the table of the boss. The clients include many enterprises which borrow money to make short term payment.
Meanwhile, Huynh Buu Quang, a senior executive of the Hong Kong and Shanghai Banking Corporation HSBC, has warned that the restrictions in providing consumer loans will badly affect production,because products will be unsellable. Meanwhile, a part of consumer loans has been going to SMEs, therefore, the restrictions will directly influence enterprises, because they do not have capital to maintain production.