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Businesses bristle at high interest rates   2010-09-27 - Viet Nam News

Sixty per cent of businesses are unhappy with banking lending rates of over 12 per cent per year, a new survey conducted by the Viet Nam Chamber of Commerce and Industry (VCCI) revealed.

The survey, which canvassed 400 companies, analysed business views on short-term lending rates including minimum and reasonable interest rates, and the long term maximum rates that businesses could endure.

Around 34 per cent of the 400 companies questioned were enjoying short-term interest rates of less than 12 per cent per year. About 94 per cent of enterprises found the rates reasonable.

In relation to short-term rates of over 12 per cent, 66 per cent of businesses already had loans. Of this, only 6 per cent of them said they found the rate acceptable, while 60 per cent complained about the rate.

Of those questioned, 88 companies or 22 per cent of businesses were borrowing money at high short-term interest rates from 12-13 per cent per year; 80 companies had loans at 13 to 14 per cent per annum; and 56 ventures were paying 14 to 15 per cent per year. Businesses claimed such high rates caused them severe operational problems, and difficulties in setting long-term business targets.

About 116 companies or 29 per cent of 400 companies were dissatisfied with lending rates, saying that the policies were unstable, which in turn, hurt their business, especially in terms of financial management and capital mobilisation.

Several credit institutions also discriminated between company types, the survey found.

An expert for the VCCI’s Businesses Development Institute said to help both businesses borrow and commercial banks extend credit, lending rates should stand at 11 to 12 per cent per year without any additional fees.

A different study analysing 2,500 small- and medium- sized enterprises conducted by the Central Institute for Economic Management also showed that 71 per cent of businesses accessed informal credit channels; 20 per cent borrowed cash from their relatives or friends, while 8.5 per cent agreed to borrow money at extortionate rates from loan sharks.

Last year, 740 companies or 36.5 per cent applied for credit from legal sources but around 150 enterprises found the process too hard. Although 80 per cent of 740 ventures received part of loans they had applied for, 57 per cent said they still required further borrowing.

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