A seminar in HCM City discusses capital flow solutions for SMEs. — VNS Photo

by Quynh Hoa

HCM CITY (Biz Hub) – Small- and medium-sized enterprises must try to generate more capital on their own and not rely on bank loans, a seminar heard today.

The seminar, which discussed cash flow solutions for SMEs, was organised by the HCM City Union of Business Association in collaboration with laisuat.vn Information Portal under the sponsorship of SeABank.

Dang Bao Khanh, general director of SeABank, said economic growth had relied on loans from commercial banks and that enterprise-owned capital represented only 20 per cent of total needed capital for business.

Banks area also businesses and must preserve their capital, he said, adding that banks and businesses need to work together to unfreeze capital flows.

SeABank's current liquidity is high and the bank is ready to support funds for enterprises, he said.

But companies need to demonstrate that their projects are feasible and prove they can generate cash flow to convince credit institutions to approve loans.

To support SMEs, the bank is offering a credit package worth a total of VND2,000 billion with preferential interest rate of 9-11 per cent per year between March 15 and December 31. At least VND200 billion of that amount has been disbursed to businesses.

In addition to the provision of support to enterprises in urban areas, SeABank is also focusing on business households in the rural areas with small loans and preferential interest rates.

Nguyen Trung Kien, manager of the HCM City branch of State Bank of Viet Nam's general research department, said the SBV's decision to reduce interest rates was done primarily to help SMEs.

The current loan interest rate has fallen by 3-4 per cent to 8-10 per cent per year for sectors such as agriculture, exports, support sector, hi-tech and SMEs.

The interest rate is equal to that in the 2005-2006 period and lower than in 2007, he said.

In the coming time, the SBV will ask commercial banks and credit organisations to settle bad debts and restructure their organisations to support businesses, especially SMEs.

Tran Du Lich, member of the Economic Committee of the National Assembly, said "the development of SMEs is a key condition in promoting a sustainable economy".

He pointed out that SMEs should not depend heavily on commercial banks.

Currently, in Viet Nam, 97 per cent of all short-, medium- and long-term loans are provided by commercial banks, he said.

"Challenges continue to face both the global and local economy, but opportunities do exist for businesses who know how to recognise and grasp them," Lich said.

Despite a mixture of opportunities and challenges, it is a good time for businesses to restructure and develop in a sustainable way, contributing to a healthier market, he added.

The Vietnamese economy can recover by the end of the year if the Government's resolutions No 1 and No 2 and support package of VND30,000 billion for the property sector are implemented effectively.

The country's growth rate is expected to reach 5.5 per cent by the end of this year and 6 per cent next year.

To reach those goals, inflation should be controlled and trust in the market should be restored.

Lich also suggested that the inflation rate should be maintained at 7 per cent from now to 2015. — VNS