“The Struggles of a Decade-Old Business: Why Can’t They Secure a Bank Loan?”

A Decade of Struggle to Access Capital: The Challenges Faced by Small and Medium-Sized Enterprises in Vietnam

According to the latest statistics from the State Bank of Vietnam, as of May, credit growth in the economy reached 6.52%, a significant improvement from the 2.41% recorded in the same period last year.

It is estimated that in the first five months of the year, total credit outstanding in the economy increased by over VND 1 quadrillion to more than VND 16.6 quadrillion. This marks a record high in credit growth for this period. However, many small and medium-sized enterprises (SMEs) still face challenges in accessing bank credit.

At a discussion on “Unlocking Capital to Boost the Private Sector” held on June 12, Mr. Nguyen Van Manh, CEO of Hanoi Construction and Trading Housing Joint Stock Company, shared that his company was established in 2006 and specializes in traditional fields such as investment in construction works, public investment, and national target programs such as new rural construction.

Mr. Manh highlighted the challenges his company faces in accessing bank capital due to the nature of their business related to construction and public investment. As a result, for over a decade, the company has relied on self-funding and external borrowing, as well as joint ventures with partners to share profits.

“We have approached banks multiple times, but the lending conditions are difficult, even though our company has collateral. When we win large government projects, we share them with other companies through joint ventures and profit sharing to ensure sufficient capital,” Mr. Manh added.

Mr. Nguyen Duc Xuan, Chairman of the Board of Directors of Ha Thanh Trading and Investment Joint Stock Company, shared a similar sentiment. “While banks may be enthusiastic about helping small and medium-sized enterprises like ours to open accounts, obtaining loans is not easy. For example, if our company wins bids for supplying medical equipment worth about VND 50 billion, we would need to approach a bank for funding. However, without collateral, accessing credit is challenging,” he explained.

Mr. Xuan further elaborated on the challenges faced by SMEs, noting that banks often require proof of winning bids, which is not straightforward as project owners cannot guarantee loans for winning bidders. As a result, companies may have to rely on larger enterprises with strong financial capabilities, ultimately sacrificing their own growth opportunities.

Mr. Dinh Duy Hung, Chairman of the Members’ Council of Duy Hung Limited Liability Company, shared his perspective as the owner of a micro-enterprise and a borrower from banks. He emphasized the difficulties SMEs face in accessing capital and the lack of post-disbursement support from bank staff to help businesses grow.

Mr. Hung highlighted that large enterprises also started as small businesses, and Vietnam has a significant number of SMEs. He suggested that if banks closely support and accompany these smaller businesses, many of them could grow into large enterprises.

Regarding interest rates, Mr. Hung expressed his hope for further reductions, as the current rates are still high compared to the profit margins of SMEs.

Timely Capital Support for Businesses: A Crucial Need

Mr. Mac Quoc Anh, Vice Chairman and General Secretary of the Hanoi Small and Medium Enterprise Association, pointed out that SMEs account for over 97% of the total number of enterprises in Vietnam, and more than 90% of these are micro or small enterprises with charter capital of less than VND 10 billion. Therefore, access to credit is not just essential but crucial for their survival and development.

According to surveys conducted by the Hanoi Small and Medium Enterprise Association in 2024, over 80% of businesses needed capital to recover from the pandemic, expand production and business activities, or innovate technology. However, only about 40% of member enterprises accessed bank credit last year. This paradoxical situation highlights a concerning mismatch between the high demand for capital and the limited supply, with credit not reaching those who need it the most.

Furthermore, while SMEs require medium and long-term capital, 80% of their loans have terms of less than 12 months, which is insufficient for efficient investment implementation. There is a significant demand for loans with terms of 3-5 years and stable interest rates, rather than the highly variable rates currently offered.

“We believe that if supported with timely and appropriate capital, SMEs have the potential to significantly boost the economy, especially in innovative fields, logistics, consumer goods production, and exports,” emphasized Mr. Mac Quoc Anh.