21-22pct credit growth target hard to achieve

06-Oct-2017 Intellasia | Bao Tin Tuc | 6:00 AM Print This Post

According to the objective of the State Bank of Vietnam (SBV), the credit growth in 2017 must reach 21-22 percent. However, statistics of the general Statistical Office (GSO) showed that the credit growth of the economy was only 11.02 percent as of September 20th. Thus, to complete the goal, from now until the end of the year, banks should develop credit by 10-11 percent, equivalent to injecting about 600 trillion dong to the market.

Economist, lawyer DrBui Quang Tin, member of the Hochiminh city Bar Association, founding director of the BizLight Business School said that in the past years, in order to boost lending in the last three months of the year, banks often increased lending by an addition of 6 percent. If this rate is applied, banks can only reach about 17-18 percent credit growth by the end of the year. “Meanwhile, since the credit growth room this year is expanded to 21-22 percent, banks will have to boost lending at full speed”, added DrTin.

The total outstanding credit in Hochiminh city as of late September was estimated at over 1,670 trillion dong, up by 13.5 percent compared to late 2016, and increased by 19.58 percent compared to the same period of 2016. According to SBV Hochiminh city branch, this rate is nearly 3 percent higher than the average national credit growth. Most of the loans focus on production and business areas, and supporting enterprises.

However, many opinions said that although the policy to stimulate lending of SBV has boosted credit and directed the capital flows into production and business, the absorption of enterprises remain limited.

According to Pham Hong Hai, general director of HSBC Vietnam, the reason is due to the slow bad debt settlement process and low credit quality. On the other hand, the capital absorption of the economy is currently not good because the majority of small and medium enterprises still face difficulties in accessing bank loans or have limited access, while they account for over 95 percent of the total enterprises in Vietnam.

Hai shared that fastening the credit growth without strict control of credit quality will lead to the same problem in the past which is the rise in bad debts, particularly if the new loans are allocated to inefficient industries, including real estate.

Therefore, to achieve the annual growth target, Dr Tin offered six recommendations. Firstly, commercial banks should maintain or lower lending rates by 0.2-0.5 percent per annum, especially for medium and long-term loans. If so, the demand for capital will increase, facilitating the achievement of credit growth target.

Secondly, banks should support enterprises with good business history, efficient business plans, and good cash flows, etc. via disbursement, granting more credit to enterprises, or extending debt maturity and restructuring debts if these enterprises are having difficulties in the production and business cycle, etc.

Thirdly, the credit growth limits for commercial banks with effective operation, low bad debt ratio and less risks should be raised, such as Vietcombank, VietinBank, BIDV, VIB, and ACB, etc.

Currently, banks have almost used up their limits to develop credit, and some have even reached the ceiling limit, while they are still having many good customers to offer loans. Therefore, raising credit growth limits will help banks continue granting loans, at the same time contributing to realise the credit growth target of the entire banking system.

Fourthly, competing by increasing deposit rates and promotions in the end of the year should be strictly limited, otherwise it will be difficult to create favourable conditions to lower lending rates in the end of the year.

Fifthly, SBV should continue to offer liquidity support on the Open Market Operation (OMO) and refinance when necessary for commercial banks with good lending, low risks and good management.

Lastly, banks should further look for good customers to lend out, especially supporting small and medium enterprises. Many of them currently have good business operations and good credit history but they do not have sufficient secured assets to borrow more capital, or their financial statements and financial documents are not as sufficient as other large enterprises.


Category: Finance

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