Lending rate almost beyond enterprises’ reach: report

HCMC – Many local enterprises are taking out short-term loans with interest rate of more than 12% a year, which they say they can’t afford for a long time, according to a survey report released on Thursday.

The organizers of the survey Vietnam Business Insight Survey announce the results at a conference in HCMC

The Vietnam Business Insight Survey, conducted among nearly 400 enterprises in the country, shows the current interest rate of short-term loans is nearly touching the unaffordable level for many local companies. It means many of them are hardly able to burden the high rate any longer.

The survey is made every quarter by the Vietnam Chamber of Commerce and Industry (VCCI) in co-ordination with the General Statistics Office and Asia Competitiveness Institute, under the financial support of the Asia Foundation.

In details, two-thirds of nearly 400 corporate respondents are borrowing short-term loans at an annual interest rate of more than 12%. About 60% of these enterprises say the lending rate is unreasonable, and 36% of them can’t afford the high capital cost loans in the long term.

Therefore, instead of borrowing from banks, they resort to other capital sources to support their operations and production, which negatively affects their investment strategy. According to the survey, about 94% of business respondents say under-12% lending rate is reasonable for them.

Besides the expensive loans, the survey found many local companies are facing challenges from lack of electric power and skilled labor, and traffic congestion.

In addition, local companies are coping with obstacles from the current business environment, said Vu Kim Hanh, vice chairwoman of Leading Business Club, at a conference to release the survey in HCMC.

Hanh explained that they suffered fierce competition from fake, cheap and smuggled goods. Hence, some of them stopped their production and were having their products outsourced to China then labeled “Made in Vietnam” to reduce costs of the products.

“Even some companies recognized as producers of high-quality Vietnamese products are outsourcing to China and label the goods as domestically made,” she said.

Hanh added that local enterprises also told her that they were burdened by un-official fees but didn’t give any details. Costs for after-sales services, promotion and environment protection are challenging local producers.

The survey also shows local enterprises’ trade and production improved in the second quarter of this year compared with the first quarter.