For businesses, the most important thing is to borrow capital, not to reduce interest rate by 0.5 percent or one percent.
Loan are more important than interest rate
At the beginning of August, many banks announced to reduce 0.5 percent of short-term lending interest rate with a number of priority subjects, of which, the record was Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) with a reduction of up to one percent. Dao Gia Hung, deputy director of VPBank’s Small and Medium Enterprise Division, said that the bank currently had about 70,000 small and medium enterprises (SMEs), accounting for 10 percent of the total number of SMEs in the country. In this record interest rate cut, VPBank targeted importers and exporters, meeting credit criteria, having a good payment history.
According to Hung, the reduction of interest rate this time was not done massively, but depending on the conditions of each bank. VPBank focused on reducing interest rate for import and export enterprises, because the bank wanted to attract these customers.
“VPBank reduced interest rate to support businesses based on a careful calculation model, not a trend”, Hung affirmed.
Interest rate reduction was good news for many businesses, especially businesses operating in priority areas. According to preliminary statistics, the credit market share of banks participating in the reduction of lending interest rate this time accounted for about 60 percent of the total credit of the whole banking system. In other words, businesses saved trillions dong of bank interest due to interest rate cut.
However, according to leaders of Vietnam Association of SMEs, what most interested businesses today is not a 0.5 percent or one percent reduction in interest rate, but how to get access to capital. In fact, the proportion of SMEs having access to bank loans was only about 30 percent. For businesses in priority areas, the rate was even lower.
To Hoai Nam, general Secretary of Vietnam Association of SMEs, said that difficulties for SMEs in accessing credit were due to the lack of legal security assets, the lack of prestige for unsecured loan, the inability to build production and business plans to consider and lend. Therefore, for SMEs, access to capital was more important than interest rate.
Banks become financial consultants
The caution of banks in lending to SMEs is understandable, because these businesses have not established trust in operating and financial capacity.
However, according to banks, if businesses change management, borrowing will be very easy. This is also the reason that in the past time, a lot of banks cooperated with fintech enterprises or launched digital applications to help SMEs manage more professionally, thereby having more favourable conditions for bank loan.
For example, at the beginning of last July, Tien Phong Commercial Joint Stock Bank (TPBank) cooperated with Misa Joint Stock Company and Finext Joint Stock Company (owning instant.vn) for online unsecured loan to SMEs based on the technology connection between the reporting system on MISA accounting software and the bank. Accordingly, the entire loan process of an enterprise could take place in 10 minutes, instead of a week or a month.
Nguyen Hung, Chief Executive Officer (CEO) of TPBank explained, financial records of enterprises on accounting software MISA could not be counterfeited. The bank could find out immediately if there was a correction, so the risk was low, while businesses reduced a lot of time and procedures.
VPBank a few months ago also launched a tool to help businesses manage cash flow on the electronic platform Bizpay to replace the manual financial management. With this solution, businesses will be easily granted credit by the bank by capturing the cash flow and reputation of supply chain participants.
Dao Gia Hung gave an example, Vinamilk had thousands of agents with a huge amount of transactions that costed a lot of time if it must be done manually. If using Bizpay, this entire tracking was automatically installed and periodically reported. Based on orders, the system would prompt the dealer to maturity. In case the account of the agent runs out of money, the bank could lend overdraft for payment, etc.
In other words, when using software to manage sales and track orders, the bank had enough grounds to lend.
According to economic experts, the government of Vietnam was asking banks to remove administrative procedures and support businesses. A series of new applications also helped banks evaluate businesses more easily than before. However, businesses themselves had to change their management accordingly.
