Hanoi (VNA) – As the importance of small-and medium-sized enterprises (SMEs) to the Vietnamese economy grows, expertsare calling on the Government to reform the system of credit guarantee fundsthat are designed to increase SMEs’ access to long-term financing.

Though SMEs account for 97 percent ofthe country’s firms and 60 percent of the total number of jobs throughout thecountry, they face a range of problems, including limited technology andmanagement expertise and a lack of available financing—70 percent of SMEsreport they have been unable to access credit. The Government has been eager tosupport such firms, but the Ministry of Planning and Investment pointed outthat the impact of 80 percent of SME support programmes and policies have notbeen evaluated, while others, including credit guarantee funds, havedemonstrated clear problems.

According to Dang Duc Anh from theNational Centre for Socio-Economic Information and Forecast, the efficiency ofthese funds in supporting SMEs’ credit access remains disappointing. The fundswere established to provide credit for firms unable to meet banks’ stricterlending standards.

Duc Anh pointed out that it has beenover 16 years since the last Prime Minister’s decision on issuing SME creditguarantee funds was issued. Since then, only 27 such funds have beenestablished, while many have minimal financial capacity and have not evenreached the minimum capital requirement of 30 billion VND (1.3 million USD).

The total charter capital of SME creditguarantee funds is estimated at only around 1.5 trillion VND, which providesguarantees for just 3.2 percent of SMEs’ total outstanding loans of 1.3quadrillion VND.

The funds have also not significantlyimproved SMEs ability to secure financing: nearly three-quarters of SMEs havefailed to access credit, according to the Vietnam Chamber of Commerce andIndustry.

Credit guarantee funds have demandedexcessively strict requirements for SMEs to receive their guarantees, includingrequirements on mortgage assets that are little different from the lendingpolicies 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 ofForeign Trade’s Finance and Banking Faculty told chinhphu.vn thatcredit guarantee funds should not seek to avoid risks by limiting their operationsor setting excessively strict lending requirements. “The funds must provideother options,” she added.

Experts have stressed that a policy ofrisk sharing between credit guarantee funds and banks should be adopted. Undersuch a policy, the funds and banks will share the responsibility of paying offthe remaining debts of enterprises if they become insolvent. The potentialratio could be 80 percent for the funds and 20 percent for the banks, or 70 percentand 30 percent, respectively. The funds are currently responsible for payingoff 100 percent.

Tran Thi Thanh Tu from Vietnam NationalUniversity, Hanoi, stressed that credit guarantee funds should cooperate withSME associations in evaluating loan guarantees.-VNA