Bankers find SME customers most attractive

In a complete about-face from earlier this year, lenders are now falling over themselves to grant business loans, especial to smaller firms – as long as they can meet eligibility requirements.

Small- and medium-sized enterprises (SMEs) are now the target customers of local banks, which should be focusing on providing more services to meet their needs, bankers have said.

Speaking at a conference in Hanoi last week, Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien said many SMEs often complained that they found it difficult to get bank loans without stopping to think why.

Statistics showed that only 15 percent of applications for loans are rejected, mainly because the companies who lodged them didn’t meet eligibility requirements, Tien said.

The Vietnam Industry and Trade Bank, or VietinBank, said the loans given to SMEs stood at about VND45 trillion (US$2.6 billion), accounting for 40 percent of its total loans.

OceanBank said 80 percent of its loans were to SMEs.

State-run Agribank, Vietnam’s largest lender, said credit growth for SMEs at the bank in the first 10 months increased by 14 percent over the same period last year.

All bankers attending the conference said they considered SMEs their target customers and they always tried to have flexible lending policies to attract more SME customers.

SMEs, or businesses with a capital of less than VND10 billion ($590,000) or having less than 300 employees, comprise around 90 percent of all enterprises in Vietnam. According to statistics released at another forum during last week’s SME National Week 2008 in Hanoi, SMEs have contributed more than 40 percent of the country’s gross domestic product and created jobs for nearly 3.4 million people.

Nguyen Thi Lan Anh, head of customer service at VietinBank, said there was no difference between a large and a small company and the only thing that mattered to banks was whether a company was creditworthy or not.

Even though VietinBank aims to become a leading bank in providing services to SMEs, it cannot give loans to companies without a strong equity base, transparent financial reporting and a feasible business plan, Anh said, noting it was important for them to show that they could meet the repayments.

Many bankers said businesses should stop thinking that they are asking for money and whether they are granted loans or not is a measure of the generosity of the banks.

Sacombank Chairman Dang Van Thanh said SMEs need to be more confident in their relationship with banks because they were the most attractive customers of not only banks but also other financial institutions.

Investment firm VinaCapital, for instance, said it was planning to boost investment into unlisted companies, most of which are SMEs.

The competition among financial institutions is fierce as they all want to attract as many SME clients as possible.

Agribank said it would cooperate with industry associations and provide long-term loans for SMEs to upgrade their production technologies.

Both OceanBank and Sacombank have recently launched new services to help SMEs restructure their financial systems.

Meanwhile, VietinBank said it is completing a credit rating system so that it can make lending decisions more easily later.

“If banks diversify their products and introduce suitable services to SMEs, they will be able to open the door to the most promising credit market,” OceanBank Chairman Ha Van Tham said.

With credit growth recently slowing down, the need to attract more SME customers has become even more urgent for banks. Many banks said they are having difficulties managing a surplus of capital set aside for loans.

Trang Thi Thuy Lien, general director of Lien Phat Footwear Company, said many SMEs like hers are not seeking bank loans at the moment.

The global economic slowdown has hurt the company’s exports to Europe and so it was cutting back on production, rather than expanding, she said.

Mai Tong Ba, director of Asia Commercial Bank’s Saigon Branch, said there were no businesses applying for new loans at the branch and its credit growth was now only about 20 percent over the same period last year.

Huynh Song Hao, deputy director of Vietcombank Ho Chi Minh City, said although banks have lowered lending rates, businesses don’t want to borrow.

The State Bank of Vietnam cut three percentage points off its benchmark rate in the four weeks to November 20, prompting commercial banks to lower their lending rates.

The current lending rates among commercial banks are 14-15 percent per year. Last year, the highest annual rate was 12 percent.

Source: TBKTSG