>> Only one third of SMEs able to get bank loans

>> Bank loan interest rates climb to new high, SMEs stop borrowing

Lending interest rates remain high, despite a recent reduction in both the consumer price index (CPI) and deposit interest rates, affecting the operations of many companies.

Lending interest rates remain high, affecting the operations of many companies

Huynh Cong Minh, Chairman of Ho Chi Minh City Union Business Association (HUBA), said the Government has instructed banks to gradually cut down lending interest rates, but, to date, the reduction has still been too modest to save many enterprises from a difficult situation.

According to HUBA’s survey, companies still find it difficult to access credit. Even those who qualify are often subject to annual interest rates upwards of 23% per year. This situation has forced many companies to scale back on their operations.

Minh said, "I\'m aware that a number of enterprises have gone under because of the lack of available credit and high interest rates."

Accroding to preliminary statistics from HUBA, only around 60% of its member enterprises are now operational.

Cao Tien Vi, Chairman of Ho Chi Minh City Young People Business Association, said, “Many companies have reported to me personally that they will face serious difficulty staying in business if the current interest rates are not lowered.”

Nguyen Van Khanh, Secretary General of the Ho Chi Minh City Leather Footwear Association, agreed, saying that the average yearly interest rates on loans, between 19.5% and 20%, is extremely high compared to overhead costs.

Decrease in interest rates may not be feasible

Dr. Tran Du Lich, Second Chief of Ho Chi Minh City Delegation of Members of National Assembly, said, it is unfeasible to further lower lending interest rates when CPI in the first half of 2011 increased by 13.2%, against December 2010. He added that the CPI is expected to rise by 17-18% this year.

According Dr. Le Tham Duong, of Ho Chi Minh City Banking University, it will be very difficult to reduce lending interest rates before the third quarter of next year.

Duong added that part of the reason for such high lending interest rates has been the race by banks to attract capital by offering high interest rates for deposits.

The Government has taken certain measures to support businesses, such as creating tax breaks and attempting to prioritise liquidity in specific sectors of the economy.

He added that companies should try to be innovative in finding their own solutions instead of waiting on Government policies to correct the situation.