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VDB’s credit guarantee program inaccessible to many businesses   2009-04-02 - VietNamNet/TT

The Vietnam Development Bank (VDB) kicked off their program on providing credit guarantees to businesses in early February 2009, which is hoped to help businesses access bank loans more easily. However, to date, very few businesses have completed formalities to get VDB’s guarantee.


According to VDB, only enterprises have received acceptance for credit guarantee from VDB, which allows them to borrow over VND500 billion.


Overly high requirements


Nguyen Viet Cuong, Director of VDB’s Exchange No. 2 in HCM City, said that he has received a lot of applications for credit guarantee, but many of the enterprises could not meet the requirements for getting the guarantee, mostly because they did not have feasible business projects.


Meanwhile, Nguyen Thi Hue, Chairwoman of the Saigon Female Entrepreneurs’ Club, Director of the Kim Ha Production, Trade and Service Company, said that the club’s members all want to borrow money from VDB’s program, but they cannot access the loans because most of them still have unpaid debts and lack collateral assets. Hue said that if VDB accepts and guarantees credit, commercial banks should not require collateral assets any more.


Other businesses said that in order to get the guarantee, they have had to spend 20 days waiting while commercial banks consider their business projects’ feasibility, and another 60 days to get the acceptance for credit guarantee from VDB. As such, businesses will have to wait a long time during which business opportunities may be missed.


Collateral assets still required


Lien Viet Bank said that the bank has not provided any loans so far under VDB’s credit guarantee program.


Doan Van Thang, Deputy General Director of Lien Viet Bank, said that the requirements on collateral assets under VDB’s program prove to be less strict than normal credit, but businesses, in order to get loans, still have to meet a lot of requirements which prove to be out of reach for many businesses.


Deputy General Director of an electronics enterprise in HCM City said that the requirements on businesses prove to be too strict. VDB asks to assess the feasibility of the project and debt payment capability, while still asking businesses to mortgage 100% of the value of the assets to be generated from the loans.


Another thing that makes businesses hesitant to ask for credit guarantee is that businesses, besides bank interest rates, have to pay a guarantee fee, 0.5% of the loans. This proves to be a big sum of money, which will push production costs up.


Regulation amendment asked


Doan Van Thang said that in order to improve the situation, VDB should ask the Government to loosen the loaning conditions for businesses. Businesses should not be required to use assets to be generated from the loans as collateral for the guarantee.


However, Cuong said that it seems to be difficult to amend Decision 14 by the Prime Minister, which was promulgated not too long ago. He said that in the immediate time, VDB will still have to follow the decision in providing credit guarantee, while still collecting suggestions from experts and businesses to amend the regulations later.

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