VietNamNet Bridge – Small- and medium-size enterprises SMEs, not state-owned enterprises as previously thought, have become the favourite clients of big banks, including state-owned ones.

A recent survey of 63,000 enterprises in 30 provinces and cities in the north conducted by the SME Development Agency under the Ministry of Planning and Investment showed that the biggest problem of the enterprises was lack of capital.

50% of polled enterprises have been found as having less than VND1bil ($62,500) in capital, nearly 75% have less than VND2bil ($125,000), and 90% of enterprises have less than VND5bil ($312,500). The survey also showed that only 32.28% of SMEs could access bank loans.

However, the figure is expected to improve as many banks have announced credit plans aimed at SMEs, saying that SMEs prove to be the clients with the greatest potential.

A representative from the state-owned Vietnam Industrial and Commercial Bank (Incombank) said that the bank was pursuing the ambitious plan to become the No 1 in funding SMEs.

In fact, in 2000, Incombank changed its view and began to consider SMEs as important clients, and the potential market to strive for in its five-year and 10-year development strategies.

Incombank has gained big achievements in the six years since implementing the strategy on developing SME clients. Now SMEs account for 50% of Incombank’s clients, while the outstanding loans to SMEs account for 60% of total outstanding loans of the bank.

As for the state-owned Vietnam Bank for Agriculture and Rural Development Agribank, SMEs are also considered priority clients. By August 31, 2007, the outstanding loans to SMEs by Agribank had increased by 20 times compared to 2001, and the growth rate of the credit provided to SMEs reaches 100% ever year. It is expected that by 2010, the outstanding loans to SMEs will be 35-40% of total outstanding loans of the bank.

Regarding capital sources, Incombank is carrying out seven credit programmes which provide soft loans sourced from funds from international institutions. These include 1. DEG (Vietnam-Germany Credit Programme, DM37.5mil), in which VND1tril ($62.5mil) has been disbursed, the current outstanding loans are VND325bil ($20.31mil); 2. JBIC programme; 3. SMEDF-EU (VND130bil or $8.12mil), in which VND63bil ($3.93mil) has been disbursed.

Statistics show that there are 230,000 existing SMEs, which account for 96% of total registered enterprises and nearly 50% of GDP. The figure is expected to reach 500,000 by 2010, and the large number of SMEs proves to be clients with great potentials that commercial banks should not ignore.

Currently, Incombank, in cooperation with UNDP and the Ministry of Science and Technologies, is providing loans to SMEs to fund the implementation of energy-saving projects. Moreover, Incombank has also announced it will use $14.1mil from commercial sources for funding SME projects. The capital sum may be enlarged if projects show their efficiency.

Pham Huy Hung, Director General of Incombank, said that the bank was doing all it could to access SMEs, e.g. to establish relations with associations and other institutions, in order to better understand clients and draw up suitable policies for these very special kinds of clients.

Source: english.vietnamnet.vn