Customer transactions at a branch og Agribank in Ha Noi. — Photo agribank.com.vn

Small and medium-sized enterprises (SMEs) are unhappy that banks do not provide them with credit to upgrade technologies, but the banks say they are willing to lend if the companies meet certain conditions.

“Domestic companies have difficulties in getting loans for technology renovation whatever their size,” an official from the Paper and Wood Pulp Association said.

Furthermore, lenders do not accept machinery as mortgage, insisting instead on other assets like land and buildings.

“Most SMEs have limited capital, and for us machines are the most important assets,” Ly Thanh Sinh, chairman of the Minh Long Hung Garment and Embroidery Company, said.

“Banks do not accept mortgages of machines and so we don’t have the chance to borrow from banks.”

Do Phuoc Tong, chairman of the Duy Khanh Engineering Company, said members of the HCM City Electricity and Engineering Association have asked banks to accept machinery but in vain.

But he admitted “Banks also face difficulties because there is no law to deal with selling machinery in case of bad debts.”

Vo Tan Hoang Van, general director of the Sai Gon Commercial Bank, was quoted by Tuoi Tre (Youth) newspaper as saying “Banks are always ready to finance technology renovation by companies who have a good reputation.”

But banks refuse to finance purchase of second-hand machines, especially from SMEs.

“Banks do not know the actual value of such second-hand machines, and it is hard for us to assess the price and check if the price claimed is correct,” Van added.

The director of another bank, who asked not to be named, said SMEs often claim very high prices, even 10 times the amount they had actually paid to buy a machine, and so banks have to be wary.

“We have had many experiences with this, and our principle is to give loans to those who can repay. Therefore, we must have clear norms for this kind of loan.”

Oversea Vietnamese economist Nguyen Tri Hieu said loans against machinery are “very common in developed nations because enterprises do not claim high prices for their machines, but in Viet Nam that is common.”

Thus, banks are forced to demand other assets like property to avoid risks, he said.

“Under the circumstances, SMEs and banks cannot see eye to eye, especially as banks’ bad debts are still very high.”

Nguyen Hoang Minh, deputy director of the State Bank of Viet Nam’s HCM City Branch, said: “We have received complaints from SMEs but we should understand banks’ difficulties.

“Besides ensuring repayment of the loans, banks also have to consider the efficacy of the company’s business plans and its financial situation, and many SMEs get refused because they do not meet the requirements.”

Even in case banks do lend, SMEs said, they only provide 60 per cent of the cost of a project instead of 85 per cent like in developed nations.

And, interest rates on medium-and long-term loans for funding technology acquisition are quite high at up to 11.5 per cent, they said.

The association official said “Many loans are provided by international sponsors but they seek guarantees from local banks. But banks mostly refuse to provide the guarantee.” — VNS