Today: 09/12/2023 19:39:33 (GMT+7)

Providing capital for economic recovery

The demand for capital to boost production and business activities is usually high at the end of the year. However, interest rates are now rising, severely affecting the recovery process of enterprises. Such a situation requires greater efforts from the banking system and enterprises for the flow of preferential capital to run smoothly.

At the start of the year, the State Bank of Vietnam (SBV) set the credit growth target at 14%, higher than the previous two years. But credit already expanded strongly in the early months, which was very different from the previous years.

Providing capital, economic recovery, demand for capital, production and business activities,  greater efforts, banking system

Manufacturing noodles at Minh Duong Food Company.

As of October 25, credit grew by 11.5% compared to the start of the year and 17% over the same period last year, which was already a high rate compared to the preceding years. Such figures showed that economic growth in the first nine months of 2022 was actively contributed to by bank capital.

After two years of operating at reduced capacity due to Covid-19, workers of Minh Duong Food Company on the outskirts of Hanoi have now returned to their pre-pandemic schedules. Minh Duong’s general director Nguyen Duy Hong said during the peak of the pandemic, the company have to accept higher costs and lower profits so as to avoid distribution disruptions and retain its customers as more than two thirds of its products are for export to Thailand, Japan, the EU and the Republic of Korea.

According to Hong, in the 30 years since its establishment, the company has always had the support of banks. With a credit line of 45 billion VND (1.8 million USD) provided by Agribank, the company is entirely proactive in paying off its debt and borrowing again, helping to maintain healthy finance.

He stated that if it had not been for the support of banks during difficult times, his company would not have maintained its stability.

Deputy General Director Vu Anh Tuan of Vinh Phuc-based CNC Tech Group, which specialises in supporting industries, said that the company was fortunate to still receive loans from banks during the pandemic period. After the pandemic, the banks also made prompt disbursements, helping the company to seize the opportunity to boost its business.

According to SBV Governor Nguyen Thi Hong, the effort to reduce lending rates will face many challenges in the time ahead as major central banks in the world are tightening their monetary policies with strong rate hikes. In addition, both domestic and foreign inflation is trending upwards due to the rising prices of input materials, transport costs, disrupted supplies and the impact of relaxed monetary and fiscal policies since 2020.

Leaders of many commercial banks stated that their banking operations are facing pressure as the net interest margin is on the downward trend due to rising deposit rates and the risk of mounting bad debt at the end of the year.

In order to increase enterprises’ access to credit amid rising interest rates, the SBV has directed banks to focus their lending on priority sectors. In fact, these sectors have witnessed decent growth, making an active contribution to economic growth. Deputy Governor Pham Thanh Ha said the central bank has set a cap on interest rates on loans to five priority sectors, namely export, agriculture and rural development, small and medium-sized enterprises, supporting industries, and businesses employing advanced technology. Qualified enterprises can all access loans with interest rates lower than market rates.

Regarding the 2 percentage point interest rate support programme, the SBV stated that it is working with the relevant ministries to issue implementation guidelines.

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Source: NDO

Providing capital, economic recovery, demand for capital, production and business activities, greater efforts, banking system
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