Banks are struggling to increase lending, which is indicated by a low credit growth of only 3.68 per cent in the first seven months. — Photo vaytien.vn

HA NOI (Biz Hub) — Corporate creditworthiness rating is a good platform facilitating banks in risk management, non-collateral loans and quick capital disbursement, but lenders are still sceptical about the degree of transparency in ratings.

Late last month, the State Bank of Viet Nam told credit institutions and rating agencies to improve their capacity of assessing creditworthiness of companies so as to increase non-collateral loans. The move was made keeping in mind Viet Nam's 12 per cent credit growth in 2014 which is likely to rest on the second half.

Banks are struggling to increase lending, which is indicated by a low credit growth of only 3.68 per cent in the first seven months.

"Lending without collateral is a decision made after many good transactions. It is impossible to grant trust loans at first sight," Tran Dao Vu, Deputy General Director of DongA Bank told baodautu.vn.

Enterprises might also gain the confidence of banks if they improved transparency in their financial reports, Vu said.

It is said that companies prepare two financial reports, the bare copy for them and the other one polished for banks, which they use to while applying for loans.

Banks said that only 1 to 2 per cent of enterprises get financial reports audited.

Under current regulations, only credit institutions, finance, securities and insurance companies, foreign-invested companies and public companies must have reports audited. There are only 1,200 public companies out of 400,000 companies in Viet Nam.

In a situation where bad debts are mounting, banks are more likely to insist on collateral, preferably in the form of property.

Director of an HCM City-based bank said that some enterprises didn't have many properties and they would like to set stocks and input sources as collateral for bank loans. However, there were risks like product circulation with this kind of collateral.

From the company's perspective, the requirement of collateral by some enterprises has made it difficult to arrange funding.

Pham Van Dung, Director of Hung Dung Honey Company in Ha Noi said that his company has a bad debt-free status with banks. He could not borrow more money to expand his business as banks already held his assets as collateral.

Tran Quy Lam, Director of Phu Tho-based Trung Kien Bottled Water Company was quoted by baodautu.vn as saying that since banks had so many bad debts they generally tightened the loan disbursement process, which in turn had an adverse impact on other performing companies.

In the document No 5342/NHNN-TTGSNH, dated July 24, the central bank urged commercial banks to employ solutions to help enterprises get access to more capital to finance production.

Experts said that both, banks and companies need each other to spend capital, but they may have to build trust before going any further. — VNS