Businesses are struggling to borrow from the VND300 trillion ($12.9 billion) low-interest credit package since banks are wary of borrowing companies going under.
Since the food and beverage industry is severely affected by the pandemic, restaurant chain operator Chao Do (Red Wok) is entitled to borrow from the government-mandated package, but its application was rejected.
The bank it approached asked it for proof of cash flows and solvency, but since all 14 outlets of its Wrap & Roll chain in Hanoi and HCM City are closed, this is not possible.
“We are suffering from severe financial damage, but to get the credit we had to provide collateral or prove our cash flows, which are very difficult for us at this time,” a company spokesperson said.
Other businesses in the food and beverage industry also said since their outlets are closed, their revenues have fallen sharply and therefore they cannot prove their solvency to banks.
The government ordered banks to provide VND300 trillion ($12.9 billion) worth of credit at low interest rates to businesses affected by the pandemic, but banks fear they will not get the money back after the pandemic is over.
More than 10 banks are committed to lending at interest rates reduced by 0.5-2.5 percentage points. As of April 10 almost VND126 trillion ($5.4 billion), or 42 percent of the amount, has been lent to 6,500 borrowers, according to the State Bank of Vietnam.
A fashion business owner in Hanoi has been struggling to borrow because he mostly leases real estate and revenues are almost zero because his stores are closed.
“Credit package with low interest sounds attractive, but how many businesses in difficulty can access it?”
Nguyen Manh Hung, chair of fruit grower and processor Nafoods, said after a bank recently rejected his application for a loan, he had to borrow from other sources at higher interest rates.
Chair of tech giant FPT, Truong Gia Binh, said “the rich” are getting most of the credit because banks consider lending to smaller businesses risky since the pandemic situation remains unpredictable.
A recent report by the Ministry of Industry and Trade admitted that most businesses in manufacturing are struggling to access the credit.
The ministry said that the State Bank of Vietnam has let banks decide who to lend to. Since they are bound by their revenue and profit targets, they are wary of supporting businesses that are suffering.
Nguyen Quoc Hung, director of the central bank’s credit department, said banks cannot lend without conditions because they themselves are businesses and have to ensure debts are recovered.
A deputy director of a state-owned bank said banks are the ones to take all the risks since businesses could go under.
The Ministry of Industry and Trade has urged the government to instruct banks to simplify credit conditions for affected businesses.
The owner of a food and beverage chain said: “Credit from banks is like ventilators; they become more important as business health deteriorates.”
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