Vietnam pledges $88.5 million in cheap loans for small enterprises

Thanh Nien News

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An undated photo of a Vietnamese coffee factory. Photo: Diep Duc Minh/Thanh Nien An undated photo of a Vietnamese coffee factory. Photo: Diep Duc Minh/Thanh Nien


The Ministry of Planning and Investment on Friday unveiled a VND2 trillion (US$88.5 million) lending program aiming to support small- and medium-sized enterprises across the country, local media have reported.
Loans will be granted to businesses through banks with an annual interest rate of 5.5 percent for short-term loans and 7 percent for medium and long ones, according to the ministry's news website Dau Tu.
The rates, which are lower than the average of 6.8-11 percent currently offered by local banks, remain unchanged for 10 years. Businesses can borrow up to VND30 billion, with priority given to some sectors such as manufacturing, waste treatment and agriculture.
It was the government's latest effort to assist local SMEs, after many years of being criticized for providing inadequate assistance to this group of businesses and favoring large state-owned enterprises.
SMEs account for 95 percent of all businesses in Vietnam and contributes to nearly 40 percent of the national gross domestic product. Critics have said these companies, with the right support and treatment, can actually do much more for the economy.
Figures from the Vietnam Association of Small and Medium Enterprises showed only 30 percent of SMEs can borrow money with low interest rates from banks.
In fact, due to the lack of access to cheap loans, many businesses had to mortgage their assets to borrow money, which has reduced their return on assets and return on equity sharply in the past two years, Dau Tu reported, citing Vietnam Chamber of Commerce and Industry.
Around 10 percent of big-sized businesses reported losses last year, compared to the rates of 32 and 17 percent among super small and small firms, and 16 percent among medium ones, according to the website.
Under Vietnam's existing laws, businesses with less than 10 employees are identified as "super small."
Small firms are those with capital of less than VND20 billion, if they operate in agriculture and industry, and less than VND10 billion, if they are in the services sector.
Medium-sized businesses' capital must be less than VND100 billion.

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