Businesses are finding bank loans more attractive following a series of key rate cuts since last October and the 4-% interest subsidy programme, a survey said.
The survey, which polled 196 enterprises in manufacturing, trading, construction and services in Hanoi, HCM City, Hai Phong, and Binh Duong Province, was carried out by the Vietnam Development Forum and the Hanoi National Economics University.
It was divided into three periods. In the first, from the end of 2007 to September 2008, 63.1% of companies complained it was “difficult” or “very difficult” to afford the high borrowing costs.
It was at this time, between February and June 2008, that the State Bank of Vietnam increased the key rate three times to 14% from 8.25% to fight inflation. Inflation was rising, going on to hit a record high of 28.3% in August.
But with inflation easing, the central bank has cut the rate six times from 14% last October to 7% now after the government shifted its priority from containing the inflation to fighting the economic slowdown.
In the survey’s second period, from September to December 2008, 40.1% of businesses said they had difficulty in affording bank loans. The ratio continued to fall to 20.8% in the third period, between last December and February, as they benefited from the key rate cuts and, especially, loan subsidies.
The government is using 17 trillion dong (US$960 million) from an economic stimulus package to provide a 4-% interest subsidy on loans to companies that export, import or produce essential goods.
Originally, the interest subsidies were granted for up to eight months on short-term loans taken between February and December this year.
But the government then decided to enlarge the programme, offering the subsidies for up to two-years on medium-and long-term loans taken between this month and December 2011. Businesses can take loans not only for their production or trade but also for upgrading facilities.
More than 202 trillion dong (US$11.4 billion) has been lent under the subsidy programme, according to the government website.
Dr Le Quoc Hoi of the Hanoi National Economics University said enterprises are “very sensitive” to macroeconomic policy changes and such changes have “significant effects” on their operation.
Though enterprises think the interest subsidy is useful, many of them complain about complicated procedures and impractical and strict regulations.
Pham Thi Kim Tan, deputy general director of Visingpack Packaging Industry Company, said it took her company nearly a month to apply for a loan, with her staff having to take papers to the bank and back many times.
A loan application often includes dozens of pages of documents and certificates, several firms said.
Nguyen Bang Tam, deputy general director of Binh Thanh Imp-Exp Production and Trade Company, said his company could not borrow money for production using materials bought in January.
Tam proposed that contracts to buy raw materials signed before February should be considered for the subsidised loans if the materials are used subsequently.
The survey found that the tortuous procedures, customers’ difficulties, and competition had a negative effect on businesses during all three periods.
About 81% of the polled companies said they expected the economy to slow down further.