Low Interest Rate Loan Not Accessible to Small Businesses
Low Interest Rate Loan Not Accessible to Small Businesses
Although banks are currently offering credit loans and different support packages at low interest rates of 14 percent annually, a lot of small and medium businesses are having trouble to get bank loans in order to avoid bankruptcy.
To assist small businesses get back from the economic crisis at present, the State Bank requested banks to decrease loan interest rates from 15 percent in the previous month to 14 percent. Unfortunately, credit is not accessible to the poor.
According to Tran Quoc Manh, the general manager of Saigon Trade and Production Development Corporation and vice president of the Handicraft and Wood Industry Association located in Ho Chi Minh City, the loan with a 15 percent interest rate every year is not available to all businesses. Because banks favor big companies rather than small, struggling ones, strong businesses can simply get this low interest rate loan while those who need it more cannot.
While it’s unreasonable to only blame banks, they do have preferences and are very picky when approving loans.
Tran Phuong Binh, president of Dong A Bank, a lot of banks will experience losses in the future since the existing capital raising rate is at 11 percent per year while treasury bills are sold at a lesser rate of 4 percent per year, along with a low inter-bank lending rate.
In spite of the desire to increase credit growth, banks are very careful in approving loan applications in order to keep away from bad debts. They are competing for potential customers, which results in a situation where strong companies are given a variety of choices while small businesses still cannot get a loan and are forced to borrow money at a higher interest rate.
According to an economic guru, banks are commercial organizations as well, so they are cautious in the decisions they make and desire profits for themselves. However, the issue here is that banks have already made profits while the rest have no support at all. Thus, small companies are facing bankruptcy lately.
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