Neither individuals nor businesses can obtain loans.
High interest rates and difficulty in obtaining loans remain a common problem for many individuals and businesses today, across all sectors.
Mr. Minh Kien (residing in Binh Thanh District, Ho Chi Minh City) stated that he applied for a loan at Lienviet Postbank at the end of 2022, but his application is still incomplete and he has not received the disbursement. Despite the bank valuing his property at a relatively low price and only lending 50% of the appraised value, for a loan of over 2 billion VND, his application remains unresolved. In early April, when he contacted a credit officer at another bank, he was told that the application could be expedited for approval because the available loan limit was approaching, but the interest rate was nearly 15% per year.
Businesses are still struggling to borrow capital; have banks run out of credit?
"The bank still says it's lending, but the conditions are much stricter. Previously, they lent money to pay for the land itself, but now they don't. Furthermore, the lending conditions are more stringent, the loan amounts are smaller, and the interest rates are excessively high. However, even if you accept and meet these conditions, getting the loan disbursed is not easy at all. In my case, it's been several months and I'm still not ready, and I'm almost certainly out of luck with the loan because the bank announced they've reached their lending limit," said Minh Kien.
According to the leader of a company specializing in aluminum door manufacturing in Ho Chi Minh City, since the end of March, he has been informed by credit officers that Lienviet Postbank has announced a halt to new loan applications. Businesses are only allowed to disburse funds, issue guarantees, open letters of credit (L/C), and commit to payments up to the amount of principal already collected, and not exceeding the total outstanding credit balance as of March 24, 2023 (excluding overdrafts, credit cards, online collateral, and compounded interest). Other banks the company has been working with only accept collateral in Ho Chi Minh City and Binh Duong , not in other provinces, making it impossible for the company to obtain loans.
Mr. Nguyen Tri Cong, Chairman of the Dong Nai Livestock Association, frankly stated that the number of members who have received new loans since the beginning of the year has been very limited, even though it is also a priority sector in agriculture .
"According to the bank's explanation, farm owners who are losing money are not eligible for new loans. However, there are pig farming cooperatives that, despite having collateral, operating profitably with complete financial reports and supporting documents, have submitted applications months ago and still haven't been approved, constantly being told to wait. Lacking money to maintain operations and keep their farms running, they resort to borrowing from outside sources to buy feed for pigs and chickens, or even to repay bank loans in order to avoid being reclassified as bad debtors and having their farms seized...", Mr. Cong said angrily.
Previously, this association had sent a letter of appeal to the State Bank of Vietnam (SBV) because "it is almost impossible to access banking services, and at times, seeing their livestock starving, they have to borrow money at high interest rates to buy feed, compounding their difficulties." In a recent reply, the SBV stated that 60 customers had received interest rate support loans. Responding to this issue, Mr. Cong said: "Our association has over 1,000 members, but according to the SBV's response, only 60 members had benefited from the interest rate support policy by the end of February 2022, which is far too few – like a drop in the ocean."
More importantly, according to Mr. Cong, the association is also reviewing who these 60 people are and whether they are eligible for preferential interest rates as stipulated...
Mr. Tran Van Duc, Chairman of the Ben Tre Business Association, reported that some businesses in the association have to borrow at interest rates of 11-13% per year. Even more tragically, some companies cannot access bank loans and have to borrow from external sources at interest rates as high as 17-20% per year.
Similarly, Mr. Lu Nguyen Xuan Vu, General Director of Xuan Nguyen Group Joint Stock Company, bitterly stated that agriculture is a priority sector, but access to credit is not easy. Banks in Ho Chi Minh City no longer accept agricultural land from outside the province as collateral as before. His company could only borrow about 10 billion VND at an interest rate of 10.5% per year, while the capital needs are much higher. Therefore, individuals within the company have to borrow from banks at interest rates of 13-14% per year, further increasing the financial costs of the business.
"Cash flow is like blood vessels; if the blood doesn't flow, the body dies."
The difficulty businesses have faced in borrowing recently has been explained by banks as being due to various reasons, ranging from not meeting regulatory requirements to businesses not needing to borrow large sums. However, in reality, besides the tightening of regulations, many banks are now nearing their credit limits – similar to the situation in the second half of 2022. Specifically, in several banks that the author surveyed last weekend, credit advisors admitted that credit limits are being tightened again and are almost exhausted.
At an MSB branch, a credit officer named T., after advising on loan applications, recommended processing applications early to avoid a repeat of the credit limit depletion situation in 2022. Similarly, a TPBank credit officer named D. stated that the bank is beginning to control credit growth again, given the high growth rate in the first quarter of 2023. It will depend on when the application is approved, but if the credit limit is exhausted, disbursement will be difficult.
When we questioned why the information suggested that banks were unable to lend while their credit limits were nearly exhausted, D. explained: "Besides lending, a portion of the current credit limit is being used to handle bonds as per regulations."
Most of the businesses that banks have committed to repurchasing their bonds or granting large credit lines are essentially subsidiaries of those banks, which explains the rapid credit growth in the first few months of the year. Furthermore, a large volume of corporate bonds matured in the second quarter of 2023, meaning banks likely had to reserve credit lines to handle these bonds.
Dr. Nguyen Huu Huan
In late February, after announcing its credit growth target for 2023 at 14-15%, the State Bank of Vietnam officially allocated credit limits to each bank. At that time, a banking industry report by VNDirect Securities Company listed a number of commercial banks that received specific credit limits, such as HDBank at 11%, ACB at 9.8%, Vietcombank at 9.6%, TPBank at 9.1%, VPBank and MBBank both at 9%, BIDV at 8.3%, and MSB receiving the highest credit limit in this initial review, at 13.5%... In reality, in just the first three months of the year, the credit growth rate of some banks has increased rapidly, such as MSB at 13%, Techcombank at nearly 10.7%, HDBank at 9%, and TPBank, Nam A Bank, and VietABank at 7%... Thus, some banks have almost reached the credit limit ceiling allocated in the first round of this year.
However, whether this capital will be injected into the economy remains a question mark, as businesses are finding it very difficult to access funds. Mr. Nguyen Huu Huan, Head of the Finance Department at the University of Economics Ho Chi Minh City, explained that some banks have recently been trading corporate bonds quite heavily, including those with buyback commitments, so they now have to reserve credit limits to fulfill these obligations. With the current high credit growth of some banks, coupled with the issue of handling corporate bonds, it is possible that some banks will run out of credit limits, similar to what happened in 2022.
At the National Assembly Standing Committee meeting on the morning of May 9th, Minister of Planning and Investment Nguyen Chi Dung stated that businesses are facing significant difficulties. Besides market sentiment, social confidence, and the avoidance of responsibility by officials at all levels, the overly tight monetary policy has made it difficult for many businesses to access capital. Credit growth in recent times has been significantly lower than usual. The Minister argued that credit limits for the economy need to be loosened because "money flow is like blood; if the blood stops flowing, the economy dies."
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