Why is it difficult for Dak Nong businesses to borrow from banks?

Weak in collateral

One of the most common reasons why businesses have difficulty accessing bank loans is the lack of collateral. According to bank regulations, borrowing often requires businesses to have collateral to secure the loan.

However, many small businesses, especially startups, do not have enough fixed assets or high-value assets to mortgage to banks.

Collateral assets of many Dak Nong enterprises are still low.

This is a big challenge. Because in addition to financial reports, production plans, mortgaged assets are considered prerequisites for banks to prioritize lending.

Dak Nong has about 4,700 registered businesses, of which 99% are small and micro businesses. Most of the businesses operate in the agricultural sector. The business's collateral is not always available or of high value.

The director of a commercial bank believes that assets are a necessary condition to increase the reputation and borrowing capacity of customers.

Financial reports and production plans of many businesses in the area still lack feasibility.

However, most of the assets mortgaged for loans to businesses in the province are secured by third parties such as: business owners, relatives, related people. Some have mortgaged assets such as factories, perennial gardens... but have not been granted ownership.

"The collateral assets almost only record land use rights, there are no assets on the land. This makes it very difficult for the bank to base the valuation of the collateral assets," said the director.

In addition to mortgage loans, unsecured loans are now being expanded to facilitate businesses in borrowing capital. However, because businesses do not meet the creditworthiness requirements for borrowing capital, it is difficult to implement.

An Phat Trading and Service Company Limited is one of the enterprises with strong potential in Dak Nong.

According to credit institutions, recently, low real estate prices and planning changes have affected businesses' collateral assets. Some real estate businesses disguised as agricultural businesses have also been affected.

Along with the issue of collateral, the current production and business plans of enterprises still have many shortcomings. This is considered the biggest barrier to building credibility with credit institutions.

Dak Nong agricultural processing enterprises are in need of capital to serve production and business.

Most of Dak Nong enterprises have limited qualifications in terms of leadership and management. The ability to grasp information, take advantage of opportunities, forecast and respond to market developments, and business strategy planning skills are still weak. From this, the development of production and business plans lack feasibility.

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Financial reports of many businesses lack reliability, are not up to standard, and have not been audited by a third party with expertise, so they lack reliability. This is the reason why banks lack information about businesses, affecting their lending decisions.

Deputy Director of BIDV Bank Dak Nong Branch Pham Quoc Viet said.

Credit institutions are still cautious.

According to the State Bank of Vietnam branch in the province, recently, credit institutions in the area have been cautious in lending to businesses, especially medium and long-term projects. The reason is fear of risks, difficulty in debt collection, and increasing bad debt.

Many credit institutions in Dak Nong are still cautious and reserved when lending to businesses.

The few businesses with good credit ratings and feasible business plans are often sought after by many credit institutions outside the province. In these cases, local credit institutions find it difficult to compete in lending policies due to pressure on interest rates.

Currently, the policy autonomy of Dak Nong provincial banks is still low. Most of the business lending policies being implemented depend on the central headquarters.

Meanwhile, Dak Nong still has its own characteristics, and the businesses also operate in a unique way. Local banks are still passive and do not have enough voice in advising on the implementation of specific policies for businesses in the province.

Dak Nong banks still do not really trust the business's capabilities (Photo: LD)

Not to mention, banks are all branches, so the conditions and lending policies must comply with the general criteria set by the head office. The ability to balance enough capital to meet the capital needs of the economy in general and businesses in particular is still low.

“Local capital mobilized only accounts for over 41.98% of total outstanding debt. Commercial banks also have to receive capital from the head office at a high cost, affecting the ability to reduce lending interest rates and implement preferential credit packages for businesses,” said Pham Thanh Tinh, Director of the State Bank of Vietnam provincial branch.

In addition, some loan approval processes and policies at banks are still complicated and time-consuming. From collecting documents, evaluating collateral, assessing financial capacity to approving loans...

Each step requires a lot of procedures and paperwork. This makes many businesses feel discouraged in meeting the requirements of the bank, especially when they need capital urgently to meet business needs.

Capital mobilized at credit institutions in Dak Nong only meets 40% of capital needs for the economy.

Discussing the difficulties in accessing capital, Mr. Nguyen Kha, Director of Dai Dung Joint Stock Company, Cu Jut District (Dak Nong) said that the company's total investment is more than 500 billion VND. However, the company has not been able to borrow any money from banks in Dak Nong.

“We want the locality to create conditions for us to access bank loans. Because in the difficult economic context, it is impossible for businesses to invest 100% of their capital,” Mr. Kha affirmed.

There is no specific policy yet.

In addition to the barriers to businesses and credit institutions, Dak Nong has lacked specific policies in recent times. Most of the credit policies that businesses are enjoying depend on the credit policies implemented by the Central Banks.

Some policies are still quite rigid and not really flexible enough to support small and micro enterprises. Regulations on collateral, loan rates, and appraisal conditions have not been adjusted to suit the business reality of enterprises.

Dak Nong has not yet issued many policies and strategies to support capital for businesses.

On the local government side, although they have directed credit institutions to facilitate business loans, there has not been much real attention.

The province has yet to issue mechanisms and policies to support credit capital for businesses. Not to mention, Dak Nong's budget and potential are limited, and there is no source to support businesses in developing production and business.

Director of the State Bank of Vietnam Provincial Branch Pham Thanh Tinh said that most of the solutions to support businesses in Dak Nong are still general in nature.

Some support policies still come from credit institutions. Many business lending policies have not been put into practice due to planning, bauxite, etc.

Meanwhile, local banks are mainly small branches compared to other provinces and cities, so many specific policy advisory documents are not large enough to be considered by the Central Government.

Banks are often concerned about a business’s ability to repay its debts, especially during difficult economic times when revenues are falling. This caution makes access to bank capital more difficult for many businesses.

Source: https://baodaknong.vn/doanh-nghiep-dak-nong-vi-dau-nen-noi-kho-vay-ngan-hang-234819.html