“Access to Capital – Unblocking Bottlenecks” Forum to resolve difficulties for small and medium-sized enterprises

DNHN - The VINASME in collaboration with the Department of Enterprise Development (Ministry of Planning and Investment) organised the Small and Medium-Sized Enterprise Policy Forum with the theme: “Access to Capital – Unblocking Bottlenecks”.

This activity was part of the Increasing Private Sector Competitiveness (IPSC) Project funded by the United States Agency for International Development (USAID).

Participating in the Forum were Dr To Hoai Nam – Member of the Prime Minister’s Task Force on Legal Document and Regulation Review, Permanent Vice Chairman and General Secretary of VINASME; Ms Trinh Thi Huong – Deputy Director of the Department of Enterprise Development (Ministry of Planning and Investment), representative of the United States Agency for International Development (USAID); representative of the Small and Medium Enterprise Development Fund; Vietnam Joint Stock Commercial Bank for Industry and Development (BIDV) and more than 100 enterprises in the provinces and cities of the Central region.

This Forum revolved around the issue of “Access to Capital – Unblocking Bottlenecks”, proposing solutions related to policies to resolve difficulties and problems for enterprises, especially small and medium-sized enterprises, in accessing capital sources to stabilise production and business operations and develop sustainably.

In his opening remarks, Dr To Hoai Nam - Permanent Vice Chairman and General Secretary of VINASME, expressed his gratitude to the Department of Enterprise Development (Ministry of Planning and Investment), the United States Agency for International Development (USAID) for their interest and funding to enable VINASME to organise the Forum, bringing value to the business community, especially small and medium-sized enterprises. Sharing the significance of the Forum, Dr To Hoai Nam said that this Forum would help enterprises gradually approach the assessment and credit rating criteria set out by the Central Association. From there, enterprises would recognise their strengths and weaknesses to improve and innovate processes to increase their competitiveness, making it easier for them to access credit funds.

It can be seen that small and medium-sized enterprises (SMEs) are one of the subjects prioritised for credit provision and many solutions have been implemented to support the unblocking and directing of credit capital flows into priority areas. At the same time, credit results for SMEs in recent times have achieved positive outcomes, with the scale of credit capital increasing. Therefore, the problems in accessing credit capital sources require continued solutions to resolve them promptly.

According to MSc. Tran Van Hien – Project Consultant, there are currently about 920,000 enterprises nationwide. Of these, small and medium-sized enterprises (SMEs) account for 98%, employing more than 5.6 million workers, contributing about 45% of the gross domestic product (GDP) and 31% of the annual total budget revenue.

According to a survey on the system with more than 100 enterprises participating in the Forum, 69% of the capital of enterprises is mainly from the enterprise owners, 20% of the capital of enterprises is borrowed and 85.1% of enterprises wish to access credit sources.

However, in reality, many SMEs currently still find it difficult to access bank capital, and the rate of SMEs accessing formal financial sources is currently still low. SMEs accessing formal financial sources through the banking system and other formal sources account for only about 25%, while up to 75% still have to mobilise friends and borrow informally.

Small and medium-sized enterprises are facing many difficulties in accessing credit capital sources due to not having collateral; having collateral but the value of the collateral is low. The proportion of loans based on the value of collateral is low, at about 50-60%.

Mr Hien provided six ways that SMEs can improve their credit guarantees. These are simplifying procedures, expanding the scope and areas for SMEs to access capital sources; enhancing the capacity to assess feasible projects and ensure capital safety, minimising the responsibility of the person with the highest responsibility of the Credit Guarantee Fund, and enhancing the capacity of SMEs and Fund staff through training courses.

“For commercial banks, credit ratings will be an important and transparent information channel used as a basis for considering loan applications from enterprises”, Mr Hien emphasised.

Speaking at the Forum, Ms Trinh Thi Huong - Deputy Director of the Department of Enterprise Development (Ministry of Planning and Investment) said that credit growth in the third and fourth quarters of 2023 showed signs of recovery, however, in the first two months of 2024, it was even negative. By March 2024, there was a slight increase of more than 2%, but in reality, it still did not reflect the capital demand and capital absorption capacity of enterprises (enterprises).

According to Ms Trinh Thi Huong, capital sources (considered the lifeblood of enterprises) are being blocked, causing a shortage of capital, and leading to many difficulties for the production and business activities of enterprises. The Government has introduced some financial packages to support interest rates for enterprises, but the actual implementation shows that enterprises still face many difficulties and limitations in accessing these packages.

At the Forum, Ms Nguyen Thi Thanh Huong - Director of Bizciti Vietnam Company made a request: In Article 16 of Decree 34 on Conditions for Granting Credit Guarantees, it is not clear, causing confusion for enterprises when the fifth condition is bound by the provisions of Article 25 of the Decree, leading to enterprises not knowing whether accessing capital requires collateral or not. Therefore, the Government needs to amend the above provision to make it easier for enterprises to understand.

Representing BIDV, MSc. Nguyen Thi Kim Phuong – Deputy Director of the Corporate Customer Department said: BIDV has signed a cooperation agreement with VINASME to support enterprises that are members of VINASME to access BIDV’s preferential packages. In addition, BIDV has coordinated with VINASME on some workshops to enhance the capacity of enterprises to access loans and use loan capital effectively. Also at this forum, Ms Nguyen Thi Kim Phuong presented solutions to support SMEs in accessing capital sources.

The Forum also spent a lot of time for enterprises to discuss with the SME Development Fund, and commercial banks the difficulties and problems in accessing capital sources; difficulties in policies and regulations; and difficulties in the capacity to access and absorb capital of SMEs.

Representing enterprises in Quang Ngai speaking at the forum, Mr Tran Duc Dung - Director of Humit Organic Fertiliser Joint Stock Company, Quang Ngai said; recently, he was supported by the Ministry of Science and Technology to invest in modern machinery and equipment to produce high-tech organic fertilisers, with a capacity of 20,000 tons/year, meeting the increasing demand for organic fertilisers of the people of Quang Ngai province and the Central - Central Highlands region. However, to expand production, more capital is needed, but over the years, his enterprise has still not been able to access preferential capital sources to expand production.

Through participating in this forum, Mr Tran Duc Dung was introduced to the SME Development Fund and BIDV Bank, who sent contacts to support him in accessing preferential loan packages.

Trong Tam