Though SMEs account for 97 percent of the country’s firms and 60 percent of the total number of jobs throughout the country, they face a range of problems, including limited technology and management expertise and a lack of available financing—70 percent of SMEs report they have been unable to access credit. The Government has been eager to support such firms, but the Ministry of Planning and Investment pointed out that the impact of 80 percent of SME support programmes and policies have not been evaluated, while others, including credit guarantee funds, have demonstrated clear problems.
According to Dang Duc Anh from the National Centre for Socio-Economic Information and Forecast, the efficiency of these funds in supporting SMEs’ credit access remains disappointing. The funds were established to provide credit for firms unable to meet banks’ stricter lending standards.
Duc Anh pointed out that it has been over 16 years since the last Prime Minister’s decision on issuing SME credit guarantee funds was issued. Since then, only 27 such funds have been established, while many have minimal financial capacity and have not even reached the minimum capital requirement of 30 billion VND (1.3 million USD).
The total charter capital of SME credit guarantee funds is estimated at only around 1.5 trillion VND, which provides guarantees for just 3.2 percent of SMEs’ total outstanding loans of 1.3 quadrillion VND.
The funds have also not significantly improved SMEs ability to secure financing: nearly three-quarters of SMEs have failed to access credit, according to the Vietnam Chamber of Commerce and Industry.
Credit guarantee funds have demanded excessively strict requirements for SMEs to receive their guarantees, including requirements on mortgage assets that are little different from the lending policies of banks, according to Duc Anh.
“If SMEs already have mortgage assets, they can borrow money from banks and might not need guarantees from the funds,” he added.
Nguyen Thi Lan from the University of Foreign Trade’s Finance and Banking Faculty told chinhphu.vn that credit guarantee funds should not seek to avoid risks by limiting their operations or setting excessively strict lending requirements. “The funds must provide other options,” she added.
Experts have stressed that a policy of risk sharing between credit guarantee funds and banks should be adopted. Under such a policy, the funds and banks will share the responsibility of paying off the remaining debts of enterprises if they become insolvent. The potential ratio could be 80 percent for the funds and 20 percent for the banks, or 70 percent and 30 percent, respectively. The funds are currently responsible for paying off 100 percent.
Tran Thi Thanh Tu from Vietnam National University, Hanoi, stressed that credit guarantee funds should cooperate with SME associations in evaluating loan guarantees.