Pham Quoc Manh, vice president of the VASEAN said that small and medium-sized enterprises (SMEs) play an important role in the Vietnamese economy, accounting for 98 per cent of the total number of enterprises nationwide.

"Amid some difficulties in business investment activities, enterprises are always thirsty for capital, especially preferential ones," he said.

Phan Thanh Ha, director of the SME Development Fund

Affirming a willingness to provide maximum support for SMEs, Phan Thanh Ha, director of the SME Development Fund said it was an area receiving the most attention of the government with several decrees issued.

Most recently, Decree No.45/2024/ND-CP issued by the government in April, amended provisions in the organisation and operation of SME Development Fund aim to provide more support for SMEs to access loans with preferential interest rates.

The fund is also offering good incentives for SMEs, with an interest rate equal to 80 per cent of the lowest lending interest rate of the big four commercial banks. In Decree 45, the interest rate has been reduced by an additional 20 per cent.

"This is the best interest rate ever on the market now," Ha said.

He added that the current short-term loan interest rate was 1.2 per cent, and the medium and long-term loan interest rate was 4.4 per cent per year. After completing the debt repayment obligation and not violating any regulations, SMEs can submit to apply for their next loans.

Tran Thanh Thuy, head of the SME Support Department, provided more specific information on the loan terms and conditions.

"Enterprises submitting loan applications at commercial banks, if matching with the bank's requirements, then the fund will send capital to the bank to disburse to SMEs," Thuy.

Innovative and creative enterprises, enterprises in the processing, manufacturing, production industries, industries that create value-added products, and enterprises in a production chain will be prioritised, Thuy added.

Regarding the loan conditions, SMEs must meet regulation criteria, have a feasible production and business plan, and ensure the owner's capital in the project is at least 20 per cent of the total investment capital.

The maximum loan amount for each project, production and business plan is not more than 80 per cent of the total investment of each project and plan. The total loan amount of the fund for an SME must not exceed 15 per cent of the fund's charter capital.

"The loan interest rate from the SME Development Fund is quite low and fixed to facilitate access for SMEs. We are working and cooperating with banks with massive branches across the country so that enterprises have more options in accessing capital," Thuy said.

At the workshop, many businesses were interested in borrowing capital from the fund and asked about specific criteria to identify as an SME. They also proposed the loosening of conditions on collateral,a maximum loan limit from the fund, as well as wishes to directly disburse from the fund without going through a bank.

Ha said that SMEs are enterprises established, organised, and operating in accordance with the provisions of the Law on Enterprises, meeting the criteria for identifying SMEs in Decree No.80/2022/ND-CP.

"Regarding the loan limit for each enterprise, an SME can borrow a maximum of VND120 billion ($5 million). However, we are preparing documents to increase capital, so the loan amount may increase in the future," Ha said, adding that requirements for collateral depend on the bank receiving the loan application.

"Lending directly without going through banks is being considered to build the legal framework, and submit it to the competent authority for approval. Currently, due to the fund's limited human resources and lack of legal basis, we cannot directly disburse to enterprises and appraise the application, so it still needs to go through banks."

Pham Quoc Manh of VASEAN said that many businesses were stuck in the application because they did not meet the criteria. Banks require businesses to expand their business activities, which is very difficult for SMEs.

"Another bottlenecks in the business loan process is part of the collateral to meet the strict conditions. Each bank has its own taste in determining collateral, and often decreases the value of assets, which also affects the business's borrowing," Manh said.

He proposed that the SME Development Fund directly lend to businesses, and recommended banks consider easing lending conditions to support small businesses.