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Banking & Finance

SMEs in need of capital

Released at: 17:50, 07/11/2015

SMEs in need of capital

Forum hears of difficulties for SMEs in accessing funds from financial institutions.

by Hung Khanh

Vietnamese small and medium-sized enterprises (SMEs) need greater cooperation among ministries and associations to better access capital, according to experts and company representatives attending a forum on enhancing the ability of SMEs to mobilize capital held recently by Finance Magazine and the Vietnam Chamber of Commerce and Industry (VCCI).

Mr. Cao Si Kiem, President of Vietnam Small - Medium Enterprises (VinaSME), said domestic SMEs must grapple with a range of issues but accessing capital is the most pressing. Many solutions have been discussed but results have been modest to date. “

"The fact is that SMEs mostly rely on bank borrowings,” he added: "but only 20 per cent are able to meet the requirements for loans, primarily because of their scale and lack of assets."

"Even though the government has many policies to encourage the supply of capital the outcome has fallen short of expectations. Borrowers and lenders have difficulties in finding common ground," he said.

Mr. Nguyen Tien Dong, Director of the Credit Department at the State Bank of Vietnam (SBV), said that as at August 31 outstanding credit to SMEs stood at VND977.08 trillion ($43.69 billion), an increase of just 4.11 per cent compared to December 31, 2014.

He identified three factors making it difficult for SMEs to approach capital sources from financial institutions. Firstly, the economy, markets, policies, and mechanisms are far from ideal, and there is an absence of cooperation among ministries, associations, and financial institutions. Secondly, SMEs lack transparency in their financial reports, making valuations problematic for financial institutions. Finally, Vietnam’s financial market remains undeveloped, with short, medium and long-term capital needed from financial institutions while deposits are mostly short term.

Mr. Dong suggested more support policies from the government toward SMEs, in particular creating mechanism for providing SMEs with guarantees when borrowing from SMEs Development Funds. People’s committees also need to simplify procedures and improve the legal framework for handling collateralized assets.

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