Banks now have money to lend, but enterprises that lack capital for their business and production cannot access bank loans for many reasons.
In the years before 2000, nearly 100% of total outstanding loans of banks were provided to state-owned enterprises (SOEs). However, SOEs now are not the main clients of banks any more, excluding the ones in the fields of power, telecommunications, petroleum and other key industries.
It is because many SOEs cannot prove their capability to pay bank debts. Experts and mass media recently have talked much about the bad performance and mismanagement of SOEs. Many of them that borrowed money before have fallen into insolvency.
In the last two years, banks have refused to give new loans to the enterprises, and have just focused on collecting debts. This explains why state-owned banks, which have the biggest proportion of loans to SOEs in the banking system, had the lowest credit growth rate in the last time. In Hanoi, by the end of June 2007, the growth rate of state-owned banks’ outstanding loans had only increased by 6% while the figure was 23% for joint stock banks.
According to the Thanh Xuan Branch of Vietincombank, banks find it hard to provide loans to equitised companies as most of these companies have not completed the procedures for getting new land use right certificates. (Under the current regulations, equitised companies must change names on the land use right certificates, and it takes 7-10 months on average to do that).
Moreover, most equitised companies cannot show legal documents proving their assets. In most cases, banks find it hard to value the assets of equitised companies to be mortgaged for bank loans.
Private enterprises have become the target clients of many banks, especially joint stock banks. However, many problems still exist, obstructing the access of these enterprises to bank loans.
According to the Southern Hanoi Branch of BIDV, the biggest problem of private enterprises is in information transparency. Nearly all financial reports of the enterprises are not reliable and unaudited; therefore, banks have no basis to consider providing loans.
In some cases, enterprises themselves make themselves ineligible for bank loans, such as when they hide true information about their actual turnover in order to evade taxes. They do not seem to understand that banks will not provide capital to enterprises with bad business performances.
It is the big worry of many commercial banks that they may not fulfill their plans to increase outstanding loans to enterprises while loaning for securities investments has been restrained by the central bank and loaning for real estate projects is limited due to the frozen market. Banks will face risks if they fund unprofitable projects, while they will not be able to obtain the targeted turnover, since 90% of banks’ incomes come from loan interest.
Source: VNE
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