SMEs find strong partner in $25 million government fund

April 25, 2017 | 14:14

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A number of firms have started to look for help from the Small and Medium Enterprise Development Fund (SMEDF) after its first year of operation.

Talking to VIR’s Khanh An, Hoang Thi Hong, general director of SMEDF, said the fund has only provided support for a limited number of firms, but is planning to become a trusted supporter for SMEs.

Since its establishment, SMEDF was expected to become a source of capital for SME projects. How did the fund work during the first year of operation?

We have spent this year on completing the legislative framework for SMEDF’s organisation and activities. The process of entrusted lending through three commercial banks (BIDV, Vietcombank, and HDBank), as well as the criteria to choose the priority SMEs and industries to support, are all completed.

SMEDF has determined four priority industries: agriculture, forestry and seafood, manufacturing and processing, and water supply, waste management and disposal, with nearly 100 business field codes at level two and three.

In particular, the chartered capital of VND837.25 billion ($36.8 million) from the 2016 national budget succeeded in encouraging private financial sources to support SMEs.

How many SMEs have benefited from SMEDF’s activities so far?

In December 2016, when SMEDF officially sorted out the eligible profiles, the entrusted banks proposed us to approve the entrusted loans for the first phase of 20 projects. This means a total capital disbursement of VND250 billion ($11 million). The disbursement will follow the projects’ deployment progress and the SMEs’ needs.

The number of SMEs supported by SMEDF was not especially large, but this was only the period for the fund to get acquainted with SMEs. By April 2017, over 1,000 SMEs approached seeking information about SMEDF’s support programmes. They contacted us at our workshops, and call centres. This is a promising sign for SMEDF after only one year of operation.

In the second year, we will make a detailed assessment of our impact on every group of SMEs we have supported.

By lending to SMEs via commercial banks, SMEDF has encouraged these banks to arrange their resources on their own, thereby influenced their decision to pick clients as their focus. Currently, banks are turning towards SMEs instead of big corporations only. Their risk assessment has also changed and their concentration on collaterals has been moved to the client SMEs’ internal capacity assessment (potential growth, owners’ experience, transparency of financial information, and so on).

Besides the preferential lending interest rate of SMEDF (5.5 per cent for short-term and 7 per cent for medium and long-term loans), the trustee banks also promise to provide preferential interest rates for commercial loans given to SMEs in accordance with the State Bank of Vietnam’s regulations, and they minimise the collateral requirements as well. In addition, commercial banks adjusted their commercial loan packages to offer more favourable conditions for SMEs to compete with the support programmes of SMEDF. Thus, SMEs have easier access to capital.

What are SMEDF’s plans for 2017?

SMEDF has promulgated a VND560 billion ($24.64 million) financial assistance programme. This programme supports innovative and creative SMEs, especially in our four industries in focus.

After seeing the merits of our programme, trustee banks also promised to co-finance the SMEs approved by SMEDF.

Besides, with our professionally-trained staff who are experienced in finance and banking, domestic and international experts in the finance and technology sectors, we believe that we can provide support and consultancy for SMEs from project planning to implementation after accessing capital.

This year, to promote transparency in operation, SMEDF has entered a cooperation with trustee banks to apply information technology to carry out the online loan application programme for SMEs.