09/11/2022 - 08:36

Interest rate increase:

Don't let enterprises go solo

TTH.VN - The interest rates and exchange rates have continuously risen in recent times, resulting in high lending rates, greatly affecting the operations of enterprises. This issue is confirmed by Mr. Duong Tuan Anh, Chairman of the Provincial Enterprise Association with Thua Thien Hue Weekend Newspaper.

Mr. Duong Tuan Anh, Chairman of the Provincial Enterprise Association

According to Mr. Duong Tuan Anh, the continuous rise in interest rates of capital mobilization triggered the surge in lending interest rates. At many commercial banks, lending rates for enterprises rise by 1-2.5% per year and those for personal loans by 2-4% per year against the early year.

And recently, the State Bank of Vietnam (SBV) has increased the operating interest rate by 1%. The refinancing interest rate also rises from 5% to 6% per year. The rediscount interest rate rises from 3.5% to 4.5 per year. Interbank overnight lending rate also rises, exerting great pressure on enterprises.

Amid the mounting inflation, the move to raise interest rates is essential for the SBV to control the money supply. But from the perspective of enterprises, this is an enormous pressure because enterprises are just starting to recover and restore investment after more than 2 years of zero growth under the impact of the pandemic.

How do you assess the current capital demand of enterprises?

Currently, the demand for short, medium and long-term loans for enterprises is enormous. Especially in the last months of this year, enterprises need capital to invest in the year-end supply of goods and services, so the capital source gets increasingly urgent.

So how do the loans affect the capital structure of the enterprise, sir?

The survey results of the VCCI (Vietnam Chamber of Commerce and Industry) show that the capital structure of enterprises remains unreasonable; the equity capital accounts for only about 20-30%, and the rest is the credit from commercial banks and other mobilized capital. It is the imbalance in the capital structure that is putting great pressure on enterprises and credit institutions (CIs).

Enterprises desperately need capital for market development

As you said, enterprises rely heavily on credit. So how are the current loan interest rates at such high levels influencing enterprises?

Currently, the lending interest rate rises from 2 to 3.5% over the previous year. Meanwhile, this is a critical time for enterprises to recover the economy. However, in order to restore the economy, the first problem is "where the money is",  which confronts enterprises with a deadlock.

Over the two years of the pandemic, despite lacking the working capital, and having no or little turnover, enterprises had to pay debts, bank loan interest, and other items to maintain and operate enterprises at a minimum level. Enterprises encountered great difficulties. Meanwhile, it is currently not easy to access loans.

According to the survey results on the reality of enterprises recently announced by the Enterprise Development Department (Ministry of Planning and Investment), 83% of enterprises said that they could not get a loan without collateral; 60% of enterprises found that the interest rates and lending conditions for private enterprises were always more difficult than those of state-owned enterprises...This figure partly reflects the reality of satisfying the capital demand of enterprises.

So, do enterprises not only come under pressure from interest rates but also lack capital?

That's right. At many forums, enterprises said that it is terribly difficult for them to access credit packages of banks, not to mention preferential credit packages. Most banks have the same answers: the loan limit is exhausted, the credit room is used up, or the customers do not meet the loan terms. These things have unintentionally exerted great pressure on enterprises, especially small and medium enterprises that are heavily dependent on credit capital.

So what is the impact of the enterprise support policies on partly removing this difficulty for enterprises?

Over the past time, many enterprise support policies have been implemented, including the policies on exemption and reduction of interest rates and fees for enterprises and the people. CIs restructured debt repayment terms, exempted and reduced loan interest, and kept debt unchanged...

There is no denying the accompaniment of the banking sector in the activities of enterprises over the past time. However, what enterprises need is ready cash. Although the interest rate support policy has been implemented for a long time, only a few enterprises benefited, most banks stood on the sidelines, and enterprises were not interested in this support package.

The reason is that the accompanying terms are really unfit for reality. For example, one of the terms for enterprises to access this preferential loan is to be in the group of reduced turnover in the previous year, but the decrease in turnover will ruin the reputation of an enterprise. Therefore, this preferential interest rate policy does not respond to the demands of enterprises.

Do you have any suggestions for CIs to accompany and reduce difficulties for enterprises?

In the current context, the fact that CIs increase the solutions for supporting enterprises is also a way to help themselves. The development of enterprises will boost the effective operation of CIs.Therefore, it is needed for CIs to cut costs to support enterprises in the current period.

In addition, granting credit should not be based heavily on collateral, but on the enterprise’s reputation, project, credit guarantee, etc. The documents and procedures also need to be simplified.

What do you think about the credit guarantee for enterprises?

In reality, there is a credit guarantee organization for small and medium enterprises in the province. However, this organization operates ineffectively. Promoting the effectiveness of this organization will be of great help to enterprises at this juncture.To this end, accompaniment from the government, departments, and sectors is sorely needed.

So for enterprises, what should they do to diversify capital flows to satisfy business demand, sir?

When interest rates rise, enterprises also have to recalculate financial problems. The first is to set up a contingency fund. Without this contingency fund, enterprises are very likely to face cash flow difficulties and solvency imbalances in the current context.

In addition, enterprises must soon perfect the management mechanism, business-finance plan, technology investment, and digital transformation and improve the management level to increase the competitiveness of products. They need to select effective business plans, focus on key business and production areas that have strengths, can generate sustainable cash flow, and avoid risky large-scale investments Transparency in cash flow is also a solution to create a cohesive relationship between enterprises and CIs.

Aside from loans, enterprises, especially start-ups, can access capital from angel investors, make the most of preferential capital sources, etc. with an eye to diversifying capital sources for development.

Thank you, sir!

Story and photos: Hoang Loan

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