How to remove bottenecks for bank loans access

Commercial banks must cut operating expenses, reduce administrative operations, and assist individuals and enterprises through methods such as fee reduction, interest rate decrease, loan restructuring, and so on.

The 1Q23 credit growth was just 1.61%, much lower than the 4.03% recorded during the same period in 2022.

>> Inadequate regulations hinder green credit growth

If the banking industry does not promptly take the aforementioned procedures, loan access will become much more difficult.

Weak credit demand

According to statistics provided by the General Statistics Office in the socio-economic report for the first quarter of 2023, credit growth was just 1.61%, much lower than the 4.03% recorded during the same period in 2022. While the State Bank of Vietnam has set a loan growth goal of 14-15% for this year.

Mr. Do Dinh Hieu, Director of the VCCI Thanh Hoa Branch, recognized that, in his many years of accompanying and monitoring the operations of the business community, firms had never faced as many challenges as they do now. Most firms struggle to get bank loans. For example, in the building sector, projects have already begun, but firms are still struggling owing to the high cost of raw materials. This results in a lack of production quantities at building sites to establish collateral assets, making it more difficult to get financing. Even while some firms are gaining lending access, they do not absorb all of the loans.

What is the solution to the problem?

According to Mr. Do Dinh Hieu, enterprises are in a tough moment, and loan access is also dependent on each enterprise's capabilities and conditions. For example, because the collateral assets of real estate enterprises have historically been properties or assets on land, their worth would be considerably lowered in the current real estate market troubles. As a result, Mr. Hieu also proposed various remedies, such as:

>> Drive bank lending to certain industries

First, while commercial banks are not permitted under existing legislation to decrease credit criteria, they can be more flexible in the assessment of collateral assets and other business conditions at this time.

Second, lending rates should be reduced to less than 10% per year. Credit institutions must follow suit since the State Bank of Vietnam has decreased policy rates twice.

Third, the Government should devise a strategy to re-energize the markets, particularly to create demand for real estate, because this industry is linked to roughly 40 other businesses in the economy.