On the side line of the event Restarting the economy Opportunities for consumer finance, financial expert Can Van Luc shared about the development of credit in 2020 and the issue of disbursement to support businesses in the context that the economy is affected by the Covid-19 pandemic.
How do you think Vietnam can consider adjusting economic growth from 6.8 percent to 5.4%?
The government has made a clear statement on the objective cause of the reduction of targets, which is due to Covid-19 pandemic. We have very good preventive but can not avoid the huge negative effects, on both supply and demand.
The government is also proposing to the National Assembly to consider adjusting the economic growth target of 4.8 percent and the determination to maximise the growth of over five percent or even 5.4%. I think this is the right approach, because China is also meeting with the National Assembly and does not emphasize economic growth targets.
We feel quite well the impact of Covid-19, especially in the socio-economic results of the first four months. This is the time when there are sufficient grounds to adjust the target.
Referring to the Covid-19 pandemic, the banking industry has recently issued a series of support policies. However, the fact that banks are willing to lend but enterprises are hard to access capital is still happening. What do you think about this situation and what do you think is the solution?
I think we are implementing very strong support policies. Basically, the financial and banking sector has done very drastically. Firstly, the debt restructuring and rescheduling have dealt with about one million businesses, with around half of the outstanding debt affected by the Covid-19 pandemic.
The second is new lending. Out of the total 600 trillion dong of credit support packages, which committed to lower interest rates, disbursed about 200 trillion dong. Credit for the first four months of the year has increased by 1.32 percent compared to the end of the previous year.
I think that in the context of diseases and the need for capital is still weak, the above figures are acceptable. Of course, there are businesses that still want to access easier and faster, we must consider the possible causes from both sides.
This makes sense to me because this is credit institutions’ capital. Credit disbursements should be controlled to avoid potential long-term risks, affecting the economy in the future. For example, at credit institutions, the procedure is relatively complicated, especially requiring collaterals or demonstrating the negative effects of Covid-19 pandemic.
Banks are willing to lend as capital is not lacking. However, the problem is the lack of real credit demand and real businesses with good financing plans to access loans. We also calculated the support, including debt postponement, interest rate reduction, and cost of the banking system. Banks will have to share about 30-34 trillion dong, equivalent to the profit reduction of about 25%.
On the business side, I think goodwill cooperation is extremely important. For example, banks require to prove this and that businesses must cooperate. For example, I find that the impact of the translation is quite clear and that is entirely within the ability of businesses to be able to prove it, if it is not in good faith, it is extremely difficult.
On the other hand, we have to avoid policy profiteering, that is, businesses have been in trouble before Covid-19 but they take advantage of the disease situation to borrow low interest rates. I think that it is necessary to pay close attention, my opinion is that there should be the participation of three sides, one is the State, the second is credit institutions and the third is enterprises themselves.
The State Bank of Vietnam (SBV) has reduced interest rates, but there is an opinion that this does not support much for businesses, what do you think?
In fact, interest rates are now not the main bottleneck for businesses. Of course, businesses still want to enjoy low interest rates but actually the most important thing is cash flow and liquidity. The government also focuses on dealing with the fiscal support package, the social security support package of 62 trillion dong and the Circular 01 for debt rescheduling.
Up to now, I think that the above measures are completely right and winning according to the actual needs of enterprises.
As for the demand for loans, after restarting the economy, the loans will surely grow stronger and commercial banks will be ready to lend, proving that the disbursement has been one third.
The credit relationship story always has some problems, but basically we are still in a relatively stable state. From May onwards, the market demand for credit may increase sharply. By the end of the second quarter, credit may increase by 3.5 percent to 4 percent and the whole year may increase by 9-10%. I think this is a relatively appropriate level in the context of weak capital demand of the economy today.
What about the guarantee fund proposal for small and medium-sized businesses, sir?
In fact, this fund has mechanisms and policies operating since 2003 but for nearly 20 years it has not developed. Currently, there are 28 credit guarantee funds for small and medium-sized enterprises, mainly due to the use of local budgets.
There are three main reasons why this credit guarantee fund is not growing. The first is capacity. Next, due to the accountability process, it is not clear. Thirdly, coordination between funds is not good. This is also a direction but it takes time to improve the capacity of both human resources, financial and technology of these funds. At that time, the problem of guaranteeing loans to businesses can be solved.
On the other hand, I think that it is necessary to better promote the small and medium enterprise development fund, which was initiated by the Ministry of Planning and Investment from 2004 to now. Last year, the government revised the regulations to ensure this fund was better, I hope this fund will coordinate better with commercial banks to promote credit flows for small and medium enterprises.
