SMEs development fund plans further reduced interest rates

August 15, 2023 - 10:39
While pending the government's review, the proposal has been well noted and received by the business community, especially by Vietnamese SMEs.
Workers at an SME specialising in cashew export in the southern province of Bình Phước. — VNA/VNS Photo

HÀ NỘI — The Ministry of Planning and Investment (MOI) has just submitted a proposal to the government to bolster support for Vietnamese start-up enterprises to facilitate their integration into domestic and global value chains, as well as industries.

The proposal, which was part of a draft decree on the organisation and activities of Việt Nam's Small and Medium-sized Enterprise Development Fund, suggested an additional 2 per cent annual reduction in interest rates for eligible businesses borrowing from the fund.

While pending the government's review, the proposal has been well noted and received by the business community, especially by Vietnamese SMEs.

"It would be a tremendous help to us if we could borrow from the fund at further discounted rates, which would reduce our financial pressure and allow us to focus on production," said Vũ Xuân Anh, CEO of a packaging company in the northern province of Hải Dương.

He added his company's core products, which are wrapping paper and plastic film, thanks to the development fund's financial support, could be priced about 15 per cent lower than imported products while remaining competitive in quality. By his estimation, the company saved up to VNĐ700 million on interest rates alone last year.

The development fund, according to MPI, has disbursed nearly VNĐ600 billion since 2016 to nearly 40 startup SMEs. It has played a vital role in supporting said SMEs to focus on the innovation of products, and participate in the country's supply and value chains.

While the figure may seem modest for SMEs' demand for lower-cost financing there have been upticks in recent months. During the first six months of 2023 alone, the fund has granted VNĐ260 billion to eight SMEs, or 87 per cent of its annual target.

According to a representative from the fund's management board, there is a plan to further cut interest rates for SMEs in the future, which is in line with the Vietnamese Government's initiative to increase support for SMEs.

"We normally based our interest rates on the lowest among Việt Nam's largest commercial banks. From there, we could further reduce rates by another 20 per cent," said Phạm Xuân Kiên, chairman of the fund's council.

For now, the fund's registered capital has reached VNĐ837 billion. However, depending on demand and business qualifications it could be increased to over VNĐ2 trillion in the future.

Nguyễn Đình Cung, former director of the Central Institute for Economic Management (CIEM) said the fund should seek out potential contributors among investors and banks.

In addition, it should prioritise establishing its own set of criteria and protocols to work directly with SMEs instead of lending through commercial banks as of now.

According to a report last year by the Ministry of Information and Communications, Việt Nam was home to nearly 800,000 SMEs. Vietnamese SMEs accounted for 98 per cent of all registered businesses, created 70 per cent of all employment and generated about 50 per cent of the country's GDP.

Besides raw numbers, the country's SMEs often play an important role in innovation, regional development, export and economic diversification. — VNS