Constipated credit flows stunt enterprises

Monday, May 20, 2013 19:15

Today's seminar, which heard that economic indices showed uncertain prospects for economic recovery. ― VNS Photo Ngoc Duy

HA NOI (Biz Hub) ― Improving credit flows between banks and enterprises was important at a time when bad debts remained uncleared and businesses were struggling, a seminar in Ha Noi heard today.

Economist Tran Dinh Thien said that first-quarter domestic economic indices showed uncertain prospects for economic recovery this year.

Two factors decisive for recovering growth and stability were weaker than those in the past years, he said, pointing out that total lending grew only 0.03 per cent while budget revenues and spending had reached 16.6 per cent and 18.5 per cent, respectively, of the quotas allocated for the whole year.

Purchasing power was extremely weak with the consumer price index (CPI) declining 0.19 per cent in March and edging up only 0.02 per cent in April.

The index of industrial production (IIP) expanded 4.9 per cent in the quarter, lower than the 5.9-per-cent rise in the same period last year.

For the first time, the number of closed-down enterprises nearly equalled the number of newly-registered businesses, reaching 15,300 and 15,700, respectively.

Last month, total deposits at credit institutions increased 5.34 per cent over the end of last year while their combined lending expanded only 1.4 per cent.

Businesses are urged to enhance cash flow management to cope with capital limits. ― Photo

Thien said that recent deposit interest-rate cuts hadn't helped much in easing firms' access to loans, suggesting the Government should immediately apply a ceiling lending rate instead of setting the current deposit cap (of 7.5 per cent).

State Bank of Viet Nam Credit Department director Nguyen Viet Manh said many enterprises still failed to manage loans, although lending rates had declined because they didn't meet banks' standards. Proving the ability to pay debts was necessary for firms to improve the situation.

Economic expert Dang Duc Son urged firms to enhance management of resources, especially balancing cash flows, to cope with capital limits.

Solving bad debts should continue to be a top priority and restructuring economic groups should be a focus for the country to facilitate lending, Thien said.

SeaBank general director Dang Bao Khanh said that the bank would continue to offer small- and medium-sized enterprises an interest rate of 9.9 per cent within a preferential lending package worth VND2 trillion ($95.2 million) in this year, a programme it applied since March 15. ― VNS

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