Companies unable to get loans despite banks have plenty of cash

Garmex Saigon, a renowned textile export enterprise in Ho Chi Minh City, reported a consolidated revenue of only VND73 million in Q3, despite five consecutive difficult quarters. The company has no orders and only 37 employees, compared to over 3,700 at the end of 2021.

Refuse to borrow money
 
Garmex Saigon's situation reflects the economic challenges, with a significant bottleneck in the credit and financial markets. Banks have excess capital but cannot lend due to weak business and economic capacity to absorb capital.

As of August 31, only 2,100 customers had access to the 2% interest rate support package, with the accumulated amount reaching nearly VND781 billion. Despite being eligible, many businesses refused the loan package. The government cited fear of inspection and examination as the main reason for refusal, highlighting the need to weigh the benefits of receiving interest rate support against the costs incurred.

The State Bank has reduced operating and lending interest rates four times to increase access to and supply of capital for the economy.

However, credit growth is slow due to businesses' weak ability to absorb capital. Unprecedented difficulties include pressure to increase production input prices, supply chain disruptions, reduced consumer purchasing power, shrinking consumer markets, and difficulties in production manpower.

Garmex Saigon, a company struggling with these challenges, has had to narrow operations and reduce costs to reduce losses. Other industry giants like Vinatex, TCM, and TNG have also experienced continuous declines in profits.

The National Assembly Economic Committee reports that the main growth drivers of the economy are slowing down or declining, facing external pressure. Merchandise exports decreased by 8.2% in the first nine months, with many key commodity groups declining deeply.

Major export markets also experienced a decline or a slight increase. Consumption recovery has not been steady, with retail sales and consumer service revenue decreasing over the quarters. Private investment only increased by 2.3% in the same period.

The medicine dose
 
Small and medium-sized enterprises face challenges in accessing bank capital due to subjective reasons and internal issues. Deputy General Director of BIDV, Mr. Tran Long, states that businesses often have two financial reports with inconsistent data, making it difficult to accurately assess their capacity and cash flow for support and disbursement.

BIDV leaders' concerns are well-founded as the bad debts of many banks continue to increase. According to the State Bank's report, the bad debt ratio on banks' balance sheets was 3.56% as of the end of July. This level is 2% higher than the end of 2022 and nearly 1.7% over the same period. 2020.
 
It is forecasted that bad debt may continue to increase when potential bad debts expire, defer, or defer debts. Mr. Nguyen Quoc Hung, General Secretary of the Vietnam Banks Association, said that in the current difficult context, businesses must proactively restructure before banks dare to lend. Businesses even have to accept cutting losses, releasing inventory... to recover capital.

Dr. Vo Tri Thanh, Director of the Institute for Brand Strategy and Competitiveness Research, suggests that reducing interest rates is just one solution to help businesses absorb capital.

He believes that interest rates are not a universal solution but should be used to improve the overall economy, connect markets, and increase business opportunities. Businesses should also strengthen risk management and information processing and take advantage of connecting industries, partners, government support packages, and digital and green transformation trends.