Unsecured loans still stopped up despite SBV instruction

illustration photo

Ho Chi Minh City-based Adeco’s chairman Truong Van Tot said his firm was facing great difficulties accessing unsecured loans from banks, despite the company’s products being stocked on supermarket shelves nationwide and strong shareholders including state-owned Ho Chi Minh City Finance and Investment Company (HFIC) and famous retailer Saigon Co.op. Adeco produces and supplies meat, including poultry and cattle.

“After a long time filing proposals to city authorities, Adeco recently accessed $476,000 in unsecured credit from the city’s preferential lending programme, with an interest rate of 6.5-7 per cent per year for short-term and 11.5 per cent per year for medium-term loans. The remaining $4.28 million needs to be sourced from VietinBank and Agribank, and will require collateral,” Tot shared.

Deputy chairman of the Ho Chi Minh City Business Association Pham Ngoc Hung said that helping more firms access unsecured loans, as committed to by the central bank (SBV), was still just policy on paper and is “very hard to realise in the current context.”

“Banks are financial institutions under the SBV’s guidance, and despite loans being their primary source of income, they are very cautious about lending, particularly as they would bear all responsibility for the loans they have provided,” said Hung.

Hung also praised the on-going bank-business networking programme banks, in conjunction with the Ho Chi Minh City Department of Industry and Trade, have organised in the southern economic hub to help a slew of firms access low-cost capital from banks.

The general director of a joint stock commercial bank in Ho Chi Minh City insisted that collateral was crucial if banks were to provide loans.

“Banks need to be cautious about lending now, as bad debts are on the rise and the market is fraught with hardship,” said the director.

According to deputy director of the SBV’s Ho Chi Minh City branch Nguyen Hoang Minh, credit in the city grew by only 3.3 per cent in the first seven months of the year, but bad debts remained high at 4.65 per cent (slightly lower than the 4.84 per cent level seen a month ago), despite city-based banks success in tackling VND8 trillion ($380 million) in bad debts during the period.

Minh said, however, that boosting credit growth, and particularly providing unsecured loans, in the current context was less feasible.

“Banks are sorting out businesses to provide unsecured loans and only good firms with viable business plans can access them as, as they are prone to risk and require banks to put more money into provisioning,” said Minh.