Firms’ thirst for capital to be quenched

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The Ministry of Planning and Investment’s Enterprise Development Agency (EDA) is set to submit to the prime minister a plan to found the Small and Medium Enterprise Development Fund (SMEDF). It is slated to come online from 2012 and specialise in lending to firms.

The initiative was heartily backed up by the business community, especially amid a vulnerable economy and squeezed credit lines.

“The birth of SMEDF is rather good since firms, particularly small-and-medium sized ones (SMEs), are struggled with mounting difficulties, particularly in borrowing,” said Nam Ha Viet Joint Stock Company’s director Le Quoc Khanh.

“SMEDF coming into existence will supplement capital sources to SMEs parallel to traditional mainstream channels,” said an EDA representative.

EDA’s core functions would be receiving financial aids to support SMEs in light of current regulations and raising funds from domestic and external sources, particularly from international entities to feed SMEs’ growth, said the EDA official.

As planned, the lending cap to each SME project is set at 70 per cent of total investment capital of each project and programme not including working capital and could not exceed VND30 billion ($1.45 million). Loaning duration must not exceed seven years.

The lending rate towards loan packages taken via commercial loans will be set by the banks themselves but must not exceed 80 per cent of benchmark rates.

The birth of a fund like SMEDF is of great significance, according to the EDA as a recent SME survey handled by the Japan International Cooperation Agency (JICA) shows that over 81 per cent of SMEs were yet to receive any credit support. In fact, just a handful of firms could take loans from credit guarantee funds for small and medium enterprises after their foundation.