Ho Chi Minh City's banking industry is ready to source low-interest capital along with many support and incentive programs to promptly support businesses to recover production after the pandemic.

Credit demand will increase again when production activities of enterprises
are restored after the social distancing period. Photo: N.H

The ready capital

Ho Chi Minh City is developing a plan to gradually open up to restore the economy. Facing heavy impacts of the Covid-19 pandemic and the prolonged social distancing period, most businesses in Ho Chi Minh City are being seriously affected. However, Mr. Nguyen Duc Lenh, Head of General Department, SBV Ho Chi Minh City branch, said that there is a basis to believe in the recovery of Ho Chi Minh City's economy after the pandemic.

Accordingly, the banking market remained stable during the recent peak of the pandemic, which is a solid foundation and the basis for the banking industry to meet the best capital sources for businesses when resuming operations.

According to a report of the State Bank of Vietnam, Ho Chi Minh City branch, credit in Ho Chi Minh City in the third quarter of 2021 is estimated to increase by only 0.76% compared to the end of the second quarter of 2021 due to the city's socio-economic situation in general and the banking industry being affected by the Covid-19 pandemic and social distancing measures. However, in the first nine months, credit growth is higher than that of the same period last year, estimated to increase by 6.41% (in the same period last year, it increased by 4.99%).

According to Mr. Lenh, credit slowed down in the third quarter, the bright spot was that credit remained stable and grew in industries that were maintaining low levels of activity, credit in EPZ-IZs even increased by more than 10% – higher than the general credit growth of 6.41%.

"This has shown the positive side of business activities and is the driving force for the economic recovery and development of Ho Chi Minh City," said Mr. Lenh.

Experts predict that credit will increase faster in the last months of the year when Ho Chi Minh City loosens social distancing measures and businesses start to operate again. According to annual statistics, credit often increases sharply in the last months of the year because this is the time that businesses have high capital needs to complete orders.

In order to meet the capital needs of businesses, at the online conference the Prime Minister and the business community held last weekend, Governor Nguyen Thi Hong affirmed that the SBV will increase credit limits for banks and adjust the appropriate interest rate according to the commitment.

The reduction of interest rates to a low level is a factor that stimulates enterprises to borrow capital to invest, restore production and business. According to a report of the State Bank of Vietnam, Ho Chi Minh City branch, in the third quarter of 2021, lending interest rates in VND for normal production and business fields are commonly applied at 6.9-8.2% per year for the short term and at 9.4-98% per year for the medium and long term. Particularly for five priority fields and industries, the lending interest rate is not more than 4.5% per year. Compared to the end of 2020, fluctuating interest rates decreased from 0.05 - 1% per year depending on the term; compared with the end of the second quarter of 2021, lending interest rates decreased from 0.01-0.13%/year.

Strengthening support for SMEs

According to Mr. Nguyen Duc Lenh, supporting businesses is a key task that the banking industry is actively implementing. The SBV has issued three circulars on supporting enterprises to overcome difficulties, restoring production and growth, including Circular 01/2020/TT-NHNN, Circular 03/2021/TT-NHNN and Circular 14/ 2021/TT-NHNN.

According to statistics, the total value of accumulated outstanding loans since January 23, 2020 has reached over VND1.6 trillion, accounting for about 60% of the total outstanding loans of credit institutions in the area. In the future, Mr. Lenh said, the State Bank’s Ho Chi Minh City branch will continue to monitor, supervise and encourage credit institutions to do well in reducing interest rates for businesses. In addition to the provisions in Circular 14, Circular 03 and Circular 01 on interest rate exemption and reduction for businesses affected by the Covid-19 pandemic, the State Bank’s Ho Chi Minh City branch also encourages credit institutions to reduce interest rates for customers.

Accordingly, banks have actively implemented support programs for each specific group of businesses such as: MSB has just announced a credit package of VND1,000 billion with interest rates from 5.5% per year to support businesses in the plastic industry; SCB also has the program "Super speed loans, business prosperity" for small and medium enterprises with interest rates from 6.99% per year and has a support mechanism for newly established enterprises; SCB provides new short-term, medium- and long-term loans to corporate customers affected by the Covid-19 pandemic with preferential interest rates, down 0.5% in the first six months.

In the future, the SBV branch in Ho Chi Minh City will also continue to coordinate with the Department of Industry and Trade of Ho Chi Minh City, the Business Association of Ho Chi Minh City, industry associations and economic departments of districts to implement the program to connect banks – businesses. At the same time, they grasp and handle difficulties of enterprises in accessing credit capital in general and Circular 14 in particular. This approach has been implemented by the State Bank for the past two years and has handled more than 800 items of feedback from businesses.

In addition, evaluating Circular 14, Dr. Can Van Luc and a team of authors from the BIDV Training and Research Institute said that expanding the target audience and debt restructuring time, businesses and people affected by the Covid-19 pandemic will reduce the pressure on debt repayment, temporarily not being transferred to a worse debt group.

As a result, businesses and people can access new loans, avoiding disruption of cash flow in production and business. Taking advantage of this opportunity, businesses and people have more resources and time to continue to resume production, with a roadmap in line with Vietnam's herd immunity.