Eliminating obstacles to capital access for small and medium-sized businesses

DNHN - The majority of production and business enterprises that require loans are currently financially depleted and lack collateral, while the banking system is also experiencing difficulties due to an excess of resources that it cannot lend.

During an interview, Mr. Nguyen Van Than, delegate to the National Assembly and chairman of the Vietnam Association of Small and Medium Enterprises, made this remark.

Sir, "COVID-19" presents many challenges to small and medium-sized businesses. What is your opinion on this matter?

Looking back on the period from 2022 to the first half of 2023, after the State's COVID-19 policies and support packages essentially end, the production and business forces, particularly small and medium enterprises (SMEs), continue to experience many negative fluctuations in the international and domestic markets: The global supply chain is not entirely decoupled, inflation continues to rise, and domestic supply is scarce, increasing the price of raw materials. increased, channels to attract capital and direct large capital such as stocks, corporate bonds, and real estate encountered difficulty; these factors caused the production force to struggle to manage the enterprise's meagre remaining capital.

Until now, the majority of businesses that need to borrow capital have been financially depleted and lack collateral, while the banking system has excess resources but cannot lend money due to lending restrictions. obtain a loan. This raises a significant question for managers: "What tumour is growing in the economy's blood vessels that is causing the capital flow to become clogged?" The affordable solution can be found on the consumer market!

Since the 13th Party Congress, the Vietnamese economy has continuously encountered challenges, most of which are non-traditional challenges, which have forced legislative and executive work at some times to adapt quickly, have both groundbreaking and risky elements and are unprecedented. The smooth coordination between the National Assembly and the Government in promulgating and coordinating the implementation of significant strategic decisions, programmes, and projects has made a significant contribution to the opening and recovery of the economy, as well as to the revitalization of production, business, and the labour force.

In the first six months of 2023, there were 113,600 newly established businesses and businesses returning to operation across the nation, which equates to an average of 19,000 businesses entering the market each month, a decrease of 2.9% compared to the same period in 2022. On the other hand, the number of businesses temporarily suspending operations for a limited time is 100,000, equating to an average monthly withdrawal of 16,700 businesses, an increase of 18.2% over the same period.

Although the number of newly established businesses and businesses returning to operation is not significantly higher than the number of businesses leaving the market, the development trend of businesses (as measured by quantity) is reversing compared to the same period last year.

According to a survey conducted by the General Statistics Office at the end of June, only 18.5% to 28.9% of exporting, production, processing, and manufacturing businesses evaluated their production and business situation. The second quarter was superior to the first; 36.2-43.2% of respondents rated the situation as stable, while 27.4-36.2% rated it as declining. This demonstrates the difficulties facing businesses, particularly small and medium-sized businesses, as a result of a sharp decline in domestic consumption and export orders.

In addition to issues with domestic consumption and export orders, up to 25 per cent of members of the Vietnam Association of Small and Medium-Sized Enterprises reported having difficulty gaining access to credit loans due to stringent lending criteria. There are still slots and situations where bank officials complicate matters. Many export businesses have proposed reducing lending interest rates for the U.S. dollar to increase international competitiveness and sustain their businesses until the third quarter of 2023 when the market is expected to show signs of recovery.

Regarding credit, even though the State Bank has reduced interest rates four times by 0.5 to 2%/year since the beginning of the year, even commercial banks have excess funds. but not lending. Technically, by June 30, 2023, the M2 money supply had only increased by 2.7%, which was significantly less than the same period in prior years. Thus, the current money supply to the economy is extremely low. In addition, the cash turnover for the first half of the year was only 0.67 times, which is equivalent to the low cash turnover for the entire year 2022. Compared to the favourable period of over 1, the cash turnover rate is noticeably slower.

Currently, in the context of the recovery, two paradoxes have emerged: Banks are required to hold unprecedentedly large deposits from individuals, while credit is expanding slowly despite rising interest rates. reduced borrowing; excess money and interest rates have decreased, but businesses cannot access it, especially small and medium-sized enterprises.

Then, what is the root of this issue, sir?

The issue of "inventory" of credit capital can be viewed primarily from three perspectives:

First, the economic situation has not completely recovered as world politics (between Russia and Ukraine) is still complicated, affecting supplies, orders and prices of imported raw materials. Domestic investment demand has not improved because traditional investment channels such as stocks, real estate, and bonds remain "frozen"; Concurrently, many high-impact projects, including public investment projects, commercial real estate, and social housing real estate, have not been implemented despite the State Bank's creation of favourable credit conditions. use, resulting in stagnant consumer demand and credit demand.

Numerous businesses want to borrow but cannot demonstrate their ability to repay. On the other hand, many businesses are invited to borrow by banks despite not needing to do so. Is it true that expanding credit capital sources is aimed not only at those who need to borrow but also at those who have funds to deposit in banks but do not know where to invest? In other words, how do they withdraw their deposits and distribute them throughout the market?

Second, it appears that commercial banks' "risk appetite" is changing. Clearly, by the end of June 2023, commercial banks will have lent nearly 2,300 billion VND to SMEs, a nearly 4% increase from the end of 2022, representing approximately 18.5% of outstanding loans to the economy. This is not a small number, but in reality, the lending environment has deteriorated over the past three months. Are commercial banks anticipating a different market expansion scenario than businesses?

Thirdly, the lack of financial disclosure, transparency, and business plans among SMBs is undeniable, and progress is slow. This is one of the three key points (along with the two mentioned above) that prevents commercial banks and SMEs from establishing trust and increasing unsecured lending. In essence, banks are businesses, so they will not refuse a loan if they are confident in the borrower's health.

What solution do you propose to resolve this issue?

Domestic factors (such as congestion in the real estate market, corporate bonds, and slow disbursement of public investment capital) and foreign factors (such as war) will continue to aggravate Vietnam's economic situation. Russia and Ukraine make it difficult to control inflation and affect supply and demand. Vietnam has numerous opportunities to recover and develop as a result of the investment shift trend, as well as other business opportunities resulting from its ascending political position.

There is a legal right for commercial banks to choose their risk appetite. Therefore, commercial banks cannot be solely blamed for the difficulties of businesses and SMBs in particular. The central model of the solution is to liberalise the market and stimulate consumption, particularly domestic consumption.

I propose the following specific solutions:

On the State side, the State's guiding role is crucial in the current context. With limited resources, the State should concentrate on removing "hot" and highly pervasive bottlenecks to create market momentum and employment opportunities for businesses and workers. For instance, promoting public investment and real estate are areas with high spillover potential; shortly, emphasis must be placed on the distribution of public investment capital and the development of social housing. State policies must encourage businesses to "be interested in social housing" by creating conditions for small and medium-sized enterprises (SMEs) to participate in at least 30 per cent of public investment projects to mobilise a variety of sources. social pressure.

We must promote the role of collective and representative organisations, such as the Cooperative Alliance, the General Confederation of Labour, and business associations and associations, to strengthen ties and encourage domestic consumption of goods. In addition, fiscal solutions such as extending the 2% VAT reduction period, supporting import tax reduction, and reducing taxes and fees are required to promote domestic consumption of goods. fees…

Quickly and comprehensively amend the Law on Support for SMEs, redefine which industries, fields, and mechanisms can lift 100 million people out of poverty, and promulgate appropriate mechanisms and policies for the growth of the SME community. Realistic, stable, and lasting growth.

Continue to refine the mechanism for the development of the corporate bond and stock markets; Expand research and create conditions for alternative capital channels, such as venture capital, angel investment, and fintech operating models. Consider modifying the operating mechanism of extrabudgetary financial funds, such as the Credit Guarantee Fund, the SME Development Support Fund, and the Industrial Science Innovation Fund, concurrently.

To maintain a healthy credit capital market, it is necessary to swiftly finalise the legal framework governing credit institutions and eliminate cross- and backyard ownership in banking activities.

Direct localities to strengthen management and support for small and medium-sized enterprises, including promoting the role of local management agencies in assisting in the evaluation and confirmation of business credit for loan guarantees.

Regarding the banking sector, quickly submit a draught amendment to the Credit Institutions Act; Promote the implementation of Resolution 35 (2016), and Resolution 58 (2023) of the Government on supporting the development of businesses and private enterprises, research and expanding loan programmes for SMEs; proactively and regularly contact businesses to increase the efficiency of lending activities at the local level; resolutely handle cases in which officials cause problems for businesses.

Consider reducing loan conditions; concurrently, collaborate with Credit Guarantee Funds to investigate and revise the coordination mechanism in loan guarantees to simplify, reduce overlapping procedures, and strengthen the Funds' roles and responsibilities. Credit assurance.

Continue your efforts to reduce interest rates based on stabilising the macro economy, promoting growth, controlling inflation, and maintaining stable exchange rates.

On the business side, actively pursue customers and new business opportunities; at the same time, improve the level of management, production, and business planning, as well as financial transparency, to provide commercial banks with a basis for lending consideration.

Coordinate proactively with representative organisations to provide information, recommendations, and feedback to the authorities to swiftly resolve difficulties and issues about business capital sources.

Our Party and State have always determined the position, function, and significance of institutions for the socioeconomic development of the nation over the past decade. The thirteenth Party Congress continued to emphasise market economy institution improvement as one of three breakthroughs. Specifically, "high-quality institutions" is a new connotation and requirement for establishing a solid legal corridor for exploiting the country's resources, including its financial resources and capital, efficiently. Institutions of high quality are required for businesses to engage in healthy competition, foster innovation, and enhance the competitiveness of the business community and the economy.

In the current context, in addition to objective market impacts, neither the State's mechanisms nor its policies have been able to promote synchronisation, nor have businesses demonstrated their ability to meet their own needs. capital... Therefore, from the perspectives of the State, banks, and businesses, it can be stated that the current credit problem cannot be resolved by the will of a single party; rather, all parties must listen to one another and stand united. each other's perspectives to jointly investigate and resolve issues and problems.

Reducing interest rates is one of the solutions that, in my opinion, must continue to be implemented. The State, particularly the Government, must support and elevate businesses in general and SMEs in particular to solve two problems: SMEs can find opportunities for sustainable development, and change the mentality of "earning a living each day"; SMEs can meet lending requirements, specifically the ability to disclose and transparent finances and business plans... To achieve this, the State's leadership in opening the market and providing business support is crucial.

This implies that if the state is only concerned with monetary policy, the effect on the market is insufficient. Therefore, it is necessary to investigate the combination of fiscal policy and monetary policy to improve future policy effectiveness and efficiency.

Thank you incredibly!

V. Ton/News Journal