Vietnam News Network

With Tet New Year not far away, more and more traders are becoming caught up in the sometimes murky world of Vietnamese credit.

Nguyen, chief accountant of a clothing company in HCM City, said in order to be able to borrow money, businesses need to be close to banks.  Better still a “special relationship” with a credit officer can pay off.

Recently Nguyen successfully received a five billion dong loan – but that special relationship didn’t come for free.  The thank you gift to the credit officer cost him 50 million dong.

He explained that such dealings are not unusual – the hardest part is “legalising” them later in accounts.

Other businesses, which are not as lucky as Nguyen, and are not in a position to borrow directly from the banks, have to turn to a third person.

These “brokers” are known locally as “storks”.

One such stork, Khanh, demands five percent in return for helping businesses receive loans worth several tens of billions of dong from banks. Khanh says the fee represents good value as loans are currently not easy to come by.

“Some other brokers offer the lower fee of 0.1-0.3 percent per month, but clients will only be able to get smaller loans with higher lending interest rates,” he said.

Further down the chain other businesses are seeking “black credit” loans. The lending interest rate in the non-bank market was five percent in early September 2009.  Now demand is higher it has raised to seven percent.

A well known lender in district 1 in HCM City told Saigon Tiep Thi’s reporters that demand has risen sharply, partially because small merchants need more capital to prepare for the year-end sale season, and partially because banks are offering fewer loans.

However, the lender says the lending interest rate of gold and dollar loans remains stable at 1-1.5 percent per month - the same rates as that of three months ago. It is because, according to her, many more people want to borrow in VND rather than dollars or gold.

Black credit is particularly popular as lenders do not require complicated procedures, and often do not even require collaterals from borrowers.

The owner of an interior furniture supermarket in HCM City related that he has become a professional lender. “At first, I lent money to some partners and the people whom I knew very well at the interest rate which was just higher by 0.5-1 percent than the rate applied by banks. However, the number of borrowers has been increasing,” he said.

“Some 20 borrowers have asked me for loans since early November, and they accept very high interest rates of 8-10 percent per month”. He said he wonders if the people can earn such high profits in order to be able to pay debts.