HDbank is one of commercial banks authorized to offer SMEDF's loans

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The challenge is not small

Because SMEDF's capital resources are limit ed, businesses must meet the priority criteria set forth in Circular No. 13/2015/TT-BKHDT, which include creative startups, high-quality products, new materials, new energy, innovative technical equipment to increase labor productivity, produce or use clean technology, clean energy, renewable energy, and so on.

Businesses can apply for SMEDF loans through authorized banks such as HDBank, Vietcombank, BIDV, and others.

Innovative startups will be funded from SMEDF capital by banks if they meet the conditions in Points a, b, c, Clause 1, Article 16 of the Decree No.39/2019/ND-CP, as well as loan security rules under applicable legislation.

Small and medium-sized enterprises participating in industry clusters are loaned from SMEDF capital by banks if they meet the requirements in Point a, Point c, Clause 1 and Point b, Clause 2 of Article 16 of Decree No.39/2019/ND-CP, while also meeting the requirements in Point b, Clause 1 of Article 16 of Decree No.39/2019/ND-CP.

Small and medium-sized enterprises participating in the value chain will be loaned from SMEDF's capital if they meet the requirements in Point a, Point c, Clause 1 and Point b, Clause 3, Article 16 of Decree No.39/2019/ND-CP while meeting the requirements in Point b, Clause 1 of Article 16 of Decree No.39/2019/ND-CP.

Barriers to be removed

Innovative start-ups are among the beneficiaries of SMEDF preferential loans. The most challenging issue for these enterprises, however, is collateral. For example, if an innovative business owns intellectual property (IP), it might mortgage it to obtain a loan from SMEDF. However, it may confront several issues in valuing intellectual property rights, particularly when intellectual property rights may have value at the time of assessment but would lose value, or perhaps cease to exist, when the loan matures... As a result, some sort of guarantee is required for this loan.

>> Creating favourable conditions for enterprises to borrow foreign capital

Another factor limit ing the SMEDF's lending activities is the requirement for SMEs to provide equity capital to participate in projects, production, and business plans of at least 20% of total investment capital, as well as sufficient capital for project implementation while meeting loan security provisions.

According to experts, these are all onerous conditions for SMEs. The Ministry of Planning and Investment recognizes that SMEs have difficulty gaining access to SMEDF's preferential finance. Due to a lack of collateral, inexperienced business owners, and no credit history to evaluate creditworthiness, they faced more hurdles than other firms in following financing laws...

Furthermore, Dr. Nguyen Quoc Hung, Vice Chairman of the Vietnam Banking Association, stated that enterprises must be well prepared in order to have access to SMEDF funds, specifically:

First, enterprises must dramatically change their strategy, organizational structure, operations, finance, and corporate governance in order to promote competitiveness, asset growth, and financial transparency as a foundation for loan evaluation.

Second, organizations must select successful business plans, concentrate on areas that allow them to capitalize on their comparative advantages, and invest in core and advanced technology;...

Expanding SMEDF’s operations

According to the Ministry of Planning and Investment, the total approved fund capital for loans in three years of SMEDF’s operation under Decree 39/2019/ND-CP, up to June 2023, is 425 billion VND (entrusted loans and loans); the total loans disbursed based on project progress is approximately 270 billion VND. This is a little sum when compared to the number of SMEs and their financing requirements.

One issue is that the SMEDF's capital is still insufficient. According to Decree 39/2019/ND-CP, the minimum charter capital of the SMEDF is 2,000 billion VND, while the actual allotment is only 837.25 billion VND, and the SMEDF's capital is roughly 1,107 billion VND. This capital is insufficient even when fully supported by charter capital.

Dr. Nguyen Dinh Cung, former Director of the Central Institute for Economic Management, said the SMEDF should seek additional outside owners and even acquire financing from commercial banks...