Interest rate initiative to benefit firms

From May 8, the maximum lending rate for businesses in four priority areas was driven down to 15 per cent, per year with an Eximbank representative saying enterprises and banks would welcome the change.

“The current short-term interest rate on the interbank market fell to less than 5 per cent per year, indicating banks’ better liquidity. Meanwhile, the banking sector credit growth contracted in the first three months of 2012. Hence, ceiling lending is important to help firms and businesses ‘meet’ each other,” according to the Eximbank source.

HDBank deputy general director Pham Thien Long said lending to export producers would be most viable of the four set priority areas, export production, agriculture and rural areas, supporting industries and small- and medium-sized enterprises (SMEs), benefited from ceiling move.

“Export producers often want dollar-denominated loans to shirk high VND lending rates since they have dollar income sources. Hence, we can easily handle the lending cap with this sort of firms,” said Long, adding that current dollar lending rates were pegged at around 5-7 per cent, per year.

Long had attributed SMEs’ lack of financial transparency, poor money flow governance capacity and family-style business to why they struggled to get loans.

A senior executive in a Ho Chi Minh City-based bank said many SMEs came below par in terms of lending requirements, hence the 15 per cent per year lending cap would not mean lower-cost loans were equally available to firms.

With the central bank’s support, banks promoting lending to agriculture and rural areas was a viable task. For instance, HDBank got a 12 per cent per year interest rate supportive credit package from the State Bank to lend agriculture and rural areas, said Long.

Vietnam Small and Medium Size Enterprises Association chairman Cao Sy Kiem said ceiling lending partly met SMEs’ aspirations.

However, Kiem said while the rates may seem tempting, few SMEs could access loans due to stringent lending requirements.