Socialist Republic of Vietnam

HCM CITY — Creditors are taking on more small – and medium-sized enterprises (SMEs), although they still leave many in the cold.

In 2004 the number of local loans to SMEs increased significantly. Many banks granted SMEs loans as big as those to major State-run enterprises.

Nguyen Trong Thanh, Sai Gon branch director of the Bank for Investment and Development of Viet Nam (BIDV), said his bank has given many loans to help SMEs relocate at the city’s request, and many others towards development.

"We’ve opened a new company to give loans to SMEs for improvement of equipment and production," he added.

Tran Quoc Tuan, Sai Gon Joint Stock Bank (SCB) director, said: "SME loans have proved to be some of SCB’s most effective investments recently. These loans make the bank’s portfolio well-rounded and give it greater potential."

"Banks will make high returns if they carefully invest in SMEs, " he said.

Many local banks have drawn up SME lending strategies. These plans allow SMEs some preferential treatment concerning interest rates and loan application procedures.

Some banks are allowing SMEs to use assets created from loans as collateral or to mortgage future assets. These open lending policies mark a change in banks’ lending priorities and strategies. Formerly, local banks and credit organisations were often hesitant to lend SMEs due to the risks involved.

SMEs were, in fact, often unprofessional and badly organized. Recently, however, local SMEs have tried to improve their quality and earn banks’ trust.

Many SMEs are operating effectively: they have mapped out long-term development strategies and improved in management, production and trade. Thus they are attracting more investment capital.

According to experts from the State Bank of Viet Nam (SBV), banks give SMEs less capital than they request. SMEs who are denied must rely on unofficial sources of capital.

They said banks in the city have missed an opportunity. There are 49,000 SMEs with a total capital of VND67 trillion ($418 million) but they’re thirsty for more.

The experts added that the central bank has urged local banks to invest more into SMEs. The central bank will issue new lending policies that favour SMEs.

Additionally, the city’s commercial bank system has pledged to offer SMEs more guaranteed loans.

If support from creditors continues, SMEs may develop and become a major component of the economy. — VNS

(Viet Nam News, March 12, 2005)