Proposal to establish a credit guarantee fund for enterprises with capital of 10,000 billion VND

At the conference to collect opinions on draft documents to be submitted to the 14th National Party Congress organized by the Party Committee of the Voice of Vietnam (VOV), Dr. Nguyen Tri Hieu - economic expert, said that Resolution 68 of the Politburo identifies private economic development as the most important driving force in the economy.

Currently, private enterprises also contribute significantly to GDP growth and account for a large proportion of human resources.

" However, small and medium enterprises, an important component of the private economy , are at a disadvantage in mobilizing loans and investment capital and are vulnerable to fluctuations in the interest rate market. The government lacks medium and long-term capital sources to support these enterprises ," said Mr. Hieu.

Mr. Hieu pointed out that in reality, after the Government issued Decree 34/2018 (on the establishment, organization and operation of the Credit Guarantee Fund for small and medium enterprises), many credit guarantee funds were established to guarantee small and medium enterprises to borrow money from banks, but they did not operate effectively.

Credit guarantee funds are an institution that many countries use to support small and medium-sized enterprises. For these funds to operate effectively, the Government must inject new capital into the funds each year so that the funds have enough capital to compensate banks and guarantee many businesses.

However, the expert said that this is a major limitation in Vietnam because Decree 34/2018 stipulates that credit guarantee funds must comply with the principle of capital preservation, and to preserve capital, funds cannot strongly guarantee businesses borrowing capital from banks, while the minimum charter capital of a local credit guarantee fund is 100 billion VND.

" This capital is too small for the fund to guarantee many local businesses to borrow capital from banks. The principle of 'capital preservation' is considered a paradox of Decree 34/2018 and needs to be considered for adjustment ," said Mr. Hieu.

Therefore, Dr. Hieu proposed that the operating regulations for credit guarantee funds should abolish the principle of "capital preservation". Because credit guarantee funds are essentially a type of insurance for banks and operate on the basis of risk calculation, they cannot operate with the principle of "capital preservation".

" A central credit guarantee fund should be established with its headquarters in Hanoi and branches in major cities. The central credit guarantee fund needs to be equipped with a charter capital of up to VND10,000 billion ," economic expert Nguyen Tri Hieu suggested.

Another issue mentioned by Mr. Hieu in his speech was group interests in the banking industry.

Although the Law on Credit Institutions (amended) has limited the shareholding ratio of shareholders and related parties to limit cross-ownership and control manipulation by interest groups in the banking sector, Mr. Hieu assessed this as a worrying issue.

Specifically, regulations on share limits at a bank can be easily circumvented by secretly dividing shares among related people, avoiding investigation by the State Bank.

" The manipulation of interest groups in the banking industry often leads to the exploitation of banks for the benefit of the interest groups themselves. In some cases, interest groups have pushed these banks into failure, which would have gone bankrupt without the intervention of the State Bank, " said Dr. Nguyen Tri Hieu.

According to the economist, in most cases, manipulation by interest groups leads to capital accumulation for projects by related companies and individuals. The consequence is a shortage of necessary capital for businesses, especially small and medium enterprises.

Faced with this situation, Mr. Hieu suggested that the State Bank improve its inspection and supervision of decisions and activities of the board of directors and credit councils to trace the manipulation of interest groups.

" The State Bank also needs to have strong sanctions to deal with the manipulation activities of interest groups, including the publication of information about violations and deterrent measures ," Dr. Hieu added.

English

Source: https://vtcnews.vn/de-xuat-lap-quy-bao-lanh-tin-dung-cho-doanh-nghiep-voi-von-10-000-ty-dong-ar987226.html