VietNam Business: SMEs

Showing posts with label SMEs. Show all posts

Wednesday, February 23, 2011

US$40 million more for SME supporting reforms

HCMC – The Asian Development Bank (ADB) is supplementing a US$40 million loan to an earlier reform program helping to untangle a knot of red tape for doing business simpler and quicker for small and medium-sized enterprises (SMEs).

ADB’s board of directors on Monday approved the loan for the first phase of the Second Small and Medium-Sized Enterprises Development Program, the bank said in a statement.

The supplementation follows an earlier ADB loan for an initial reform program helping to slash the time needed to register a business, and support a sharp rise in new enterprises and private sector jobs. SMEs make up a large majority of all registered enterprises in Vietnam and most new jobs in the last decade were generated by the sector.

“The priority for the Government of Vietnam is to sustain high economic growth to create productive jobs for around 1.7 million new workers each year, and growing SMEs is an essential part of its development strategy,” Edimon Ginting, senior economist in ADB’s Southeast Asia Department, said in the statement.

Despite the strong progress over the past four years, difficulties in businesses’ accessing medium-term capital as well as some ongoing regulatory issues have slowed down the registration of new SMEs and the expansion of existing ones. Meanwhile, economic overheating and the global financial crisis have created further challenges for local enterprises.

The release of funds for the latest program follows the achievement of key reform milestones by the government. These include steps to develop a comprehensive policy to address constraints to trade and competition, as well as measures to simplify and streamline business procedures, the introduction of a pilot e-customs program in 10 provinces, and the introduction of a web-based national business registration system. The Government has introduced a nationwide credit guarantee system to support commercial banks lending to SMEs.

The latest loan from ADB’s concessional Asian Development Fund has a 24-year term including a grace period of 8 years, with an annual interest charge of 1%, rising to 1.5% for the balance of the term.

A second phase of the program will provide support to continue reforms to improve business competitiveness, and access to finance for SMEs.

The Ministry of Planning and Investment is the executing agency for the full program with the target completion date yet to be finalized.

Sunday, February 20, 2011

Access to bank loans seen easier for SMEs

HCMC – The biggest concern raised by almost all enterprises at a seminar on capital for small and medium enterprises (SME) last week is difficult access to loans at commercial banks but the situation is expected to improve in the near future.

A business executive said at the seminar that commercial banks should keep their promises. He had joined a lot of similar seminars where banks promised to support SMEs, but after that he got disappointed when no bank approved his borrowing application, he said.

Nguyen Xuan Lam, director of L.V. Company, which produces auto parts, said his SME falls under the category of having priority access to bank loans in line with Government policy as his enterprise exports all output and operates in the hi-tech industry. However, no bank has lent to his business, causing its loss of contracts, he noted.

“In the past big foreign customers expressed interest in placing orders with us but we could not secure them because our facilities do not meet their requirements,” Lam said. His enterprise is borrowing capital from ACB, he said, and it needs long-term capital to build a factory.

The two are among the many businesses that have found it impossible to take out bank loans due to high interest rates and hindrances along the way.

Do Lam Dien, deputy head of corporate clients at Maritime Bank, said there existed many obstacles to SMEs’ access to bank loans, such as lack of mortgages, banks’ unwillingness to lend to SMEs, problematic tax payment reports, unsound business plans, and high lending rates.

However, the situation is seen changing for the better in the coming time. Commercial banks, seeking to boost lending, have begun to see SMEs as a potential market, and mapped out plans to tap those corporate customers.

Banks, including foreign ones, have set up a department in charge of SMEs, and most of them said SMEs are their potential clients.

Many programs targeting this segment have come out. For example, An Binh Bank has combined with IFC to support SMEs, and HDBank has earmarked VND2 trillion for financing enterprises in the coffee sector.

Nguyen Dinh Tung, deputy general director of Maritime Bank, said the bank had gauged demand of local SMEs over the past two years to work out a qualitative model to assess corporate clients, instead of the quantitative model that used to be applied.

“We will learn about SMEs as clients by accessing and interviewing them,” Tung said at the seminar.

According to the HCMC Institute for Development Studies, Vietnam now has 500,000 enterprises of which SMEs account for 97%. SMEs are responsible for about 30% of GDP, 30% of industrial output value, nearly 80% of total retail sales, and 64% of total goods transport volume every year.

Thursday, February 10, 2011

Credit-Thirsty SMEs Seeking Ways To Survive

Customers seek consulting for their borrowing at Prudential Finance in HCM City

Small- and medium-sized enterprises (SMEs) are regarded as the backbone of the economy, accounting for 97% of the 470,000 registered businesses. Over the years, they have played an increasingly significant role in the economy, contributing to the GDP and generating employment.

Vietnam’s SMEs are presently very much in need of capital to expand their operations and profits. However, they are facing tremendous difficulties in gaining sufficient access to finance, the most important obstacle to their growth.

Vu Cong Hoa, head of Phuong Nam Packaging and Mechanical Engineering Cooperative in HCM City, is struggling to find funds to continue the project that is two-thirds complete. His business, which is conducting a study on creating a waste processing line to turn garbage into organic fertilizers, has not generated any revenue since the beginning of the year. Up to now, 70% of the work done has resulted in various types of machinery lying in heaps in the cooperative’s warehouse.

Unable to raise sufficient capital from cooperative members as well as failing to obtain bank loans, Hoa has resorted to every credit fund but to no avail. He has yet to know how to overcome the capital shortage in the future.
Hoa’s dilemma is typical for many local SMEs which are thirsty for investment capital and have no idea how to quench their thirst. Inadequate access to finance remains a great concern for SMEs despite numerous Government moves and banks’ efforts. On the one hand, SMEs can articulately present to banks all their difficulties in terms of capital, technology renovation, facility construction and investment. On the other hand, banks frequently face problems in evaluating loan applications from enterprises.

Indeed, experts have pointed out two major issues among others that are borrowers’ financial statement and collateral. Financial reports of businesses are deemed to be unreliable and lack transparency. Some businesses may maintain two to three different accounting records on their operation: A financial report which often declares loss aiming at evading tax; another for internal use that would not be revealed to outsiders; and maybe a third one for shareholders’ review.

Applications for bank loans with a financial statement declaring loss would surely be rejected. Banks would set aside money for credit-worthy SMEs, those with accurate reports, feasible business plans and high possibility for solvency.

Even when banks neglect the misleading financial statement and switch to scrutinizing project feasibility, many businesses still cannot meet this requirement. In many cases, enterprises try to seek short-term loans to finance long-term assets like machinery, equipment and facility construction. Besides, collateral and financial capacity are other hurdles that block businesses from access to bank loans.

Where to turn to for funding

Experts said SMEs can seek loans from credit sources offering long-term loans, finance sources formed under joint ventures, finance leasing companies and credit funds. They can also approach foreign financial institutions that promote projects related to climate change or clean production with minimal impact on the environment. To ensure success, applicants should fully understand the institution’s evaluating criteria. Generally, lenders want a coherent financial statement that has been audited and a profitable business plan.

The first capital source for enterprises came from Government policy. According to Tran Buu Long, vice director of the HCM City Credit Fund, credit policy for SMEs has been implemented through various municipal programs. The large scale program provides the investment stimulus package while smaller programs cover a series of funds for various purposes. There are a fund that revolves the money to facilitate cleaner and greener production for businesses, fund to mitigate environmental pollution, fund to support science and technology development, and fund to assist businesses in building warehouses and transportation infrastructure.

The city’s Science and Technology Development Fund has an initial capital of VND50 billion with non-mortgage interest rate ranging from 0%. Its maximum level is half of that of commercial banks. The fund can provide non-refundable loans for certain projects. Its capital is expected to reach VND200-300 billion by year-end.

The HCM City Finance Investment Company that holds many capital sources of the city is also a potential lender for businesses.

The city’s Credit Guarantee Fund has provided guarantees for businesses to borrow a total of VND400 billion up to now. However, banks have turned down many applicants who have been guaranteed by the fund. Currently, the fund’s balance of about VND277 billion is too modest for the demand of over 200,000 businesses in the city.
Commercial banks are probably best positioned to improve SMEs’ access to finance. Many banks are carrying out promotion programs targeting SMEs considered to be their potential customers. ACB has some projects to aid SMEs; some in collaboration with the Japan Bank for International Cooperation while others linking with projects in the European Union.

Another example is the partnership between the International Finance Corporation and Techcombank in a program worth US$125 million that focuses on supporting local SMEs in renovating technological equipment and saving energy.

SMEs’ journey to seek capital seems to be full of hardships. Yet amid those difficulties, the authority of Long Hau Industrial Park in Can Giuoc District, Long An Province has managed to find a practical solution. Well aware of businesses’ financial woes, the authority of Long Hau has borrowed capital and lent it to businesses operating in their park.

Long Hau Industrial Park has built facilities and workshops for lease or sale to businesses and allow them to pay by monthly installments over a duration as long as 10 years. The park also helps businesses obtain long-term bank loans in cash. Besides, it works on creating funding channels for businesses by collaborating with financial institutions and banks. Long Hau’s efforts have eased businesses’ financial pressure and lured more customers into the park.

Monday, December 27, 2010

Vietnamese SMEs upbeat about economy: survey

Jeff Mclean (C), general manager of UPS Vietnam, at the function held yesterday at the Sofitel Plaza Saigon in District 1 to announce the fifth UPS Asia Business Monitor 2010 - Photo: Nhan Tam

HCMC – Some 72% of 100 Vietnamese small and medium enterprises (SMEs) are optimistic that they will perform better business in 2010, according to a survey conducted in the Asia-Pacific region whose results were released here on Wednesday.

For economic sectors, the construction industry will continue to boom as 53% of Vietnamese SMEs believe that this sector continues to be the country’s key growth industry this year, followed by IT (36%) and leisure and tourism (28%).

In the medium term for between three and five coming years, local SMEs still place the top choice on the construction industry as the key economic pillar with 53%, followed by agriculture (29%), leisure and tourism (29%), and IT (26%), according to the fifth UPS Asia Business Monitor (ABM).

The survey, outsourced to the independent research organization TNS in Hong Kong by the logistics service provider UPS, was conducted between March 11 and April 20 this year. This is the first time Vietnam participated in the annual UPS ABM, which also covers other markets like Australia, China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand.

Vietnamese SMEs also cast an optimistic view on the Asia-Pacific region, with some 59% believing that the Asia Pacific economy would continue to grow while 9% of them expect a decline and the remaining 32% expect the economy to remain the same.

Jeff Mclean, general manager of UPS Vietnam, said that the Vietnam survey results would greatly assist the company in how to better meet the needs of local SMEs as they compete in the global market.

However, he added that despite the prevailing positive growth sentiment, Vietnam seems to be the least optimistic regarding workforce projection in the region. An overwhelming 61% of those surveyed intend to reduce their workforce, while none of them plan to increase their workforce.

“They have optimistic views about the future, but they still feel worried,” Mclean told the Daily after the function to announce the survey, adding that they just want to take advantage of current human resources to overcome the difficulties.

The survey also showed that although the Vietnamese economy is expected to grow this year, local entrepreneurs still encounter challenges as about 7 out of 10 Vietnamese SMEs say that their top business concern is costs.

The second biggest concern is the high interest rate while competition is the third biggest concern.

UPS ABM 2010 surveyed 1,351 decision-makers of SMEs between March 11 and April 20 this year. SMEs are defined as companies with fewer than 250 employees. Respondents were from a range of industries such as electronics, construction, food and beverage, services, manufacturing, automotive, garments and textiles, IT, tourism and hotel, healthcare and pharmaceuticals and others.

Vietnamese SMEs upbeat about economy: survey

Jeff Mclean (C), general manager of UPS Vietnam, at the function held yesterday at the Sofitel Plaza Saigon in District 1 to announce the fifth UPS Asia Business Monitor 2010 - Photo: Nhan Tam

Jeff Mclean, general manager of UPS Vietnam, said that the Vietnam survey results would greatly assist the company in how to better meet the needs of local SMEs as they compete in the global market.

The second biggest concern is the high interest rate while competition is the third biggest concern.

Wednesday, December 22, 2010

SMEs believe in decisive role for national development

A majority of Vietnam’s small- and medium-sized enterprises (SMEs) believed in their decisive role for the future of the national economy as well as were their business development prospects.

The result was indicated in an annual survey on Asia’s business situation conducted by the world’s leading transportation group UPS called Asia Business Monitor (ABM) which was announced Wednesday.

The 2010 ABM was conducted on around 1,350 leaders of SMEs from 13 countries and territories, including Australia , China , Hong Kong , India , Indonesia , Japan , the Republic of Korea , Malaysia , the Philippines , Singapore , Taiwan , Thailand and Vietnam . This was the first time Vietnam took part in the survey.

According to the survey, 59 percent of Vietnamese SMEs showed their optimism about further development of the Asia-Pacific economy, 9 percent said the regional economy sees a downward trend and the remaining 32 percent said it will remain unchanged.

Vietnam was the second optimistic market in the region in business development prospect in 2010 with 72 percent of interviewed businesses saying their companies will reap better results this year. Indian businesses are the most optimistic about this prospect with 85 percent.

Although nine out of ten Vietnamese SMEs pay attention to business activities in the Asia-Pacific market, they also expect their growths in other regions. Eighty-one percent of surveyed businesses forecast that Vietnam ’s business activities will increase 61 percent in North American and 60 percent in Europe .

Fifty-eight percent of Vietnamese SMEs said international business has positive impacts and opens up new opportunities for their operations. They added that architecture-construction, information technology and tourism will be key sectors in 2010.

Although the national economy is forecast to keep growing this year, Vietnamese businesses are facing a lot of challenges, particularly, high credit interest rate and competitiveness pressure.

Vietnam’s SMEs said the government’s supportive polices are very necessary for them to improve their competitiveness.

Tuesday, December 21, 2010

SMEs believe in decisive role for national development

A majority of Vietnam’s small- and medium-sized enterprises (SMEs)
believed in their decisive role for the future of the national economy
as well as were their business development prospects.

The result was indicated in an annual survey on Asia’s business
situation conducted by the world’s leading transportation group UPS
called Asia Business Monitor (ABM) which was announced on September 29.

The 2010 ABM was conducted on around 1,350
leaders of SMEs from 13 countries and territories, including Australia ,
China , Hong Kong , India , Indonesia , Japan , the Republic of
Korea , Malaysia , the Philippines , Singapore , Taiwan , Thailand
and Vietnam . This was the first time Vietnam took part in the
survey.

According to the survey, 59 percent of
Vietnamese SMEs showed their optimism about further development of the
Asia-Pacific economy, 9 percent said the regional economy sees a
downward trend and the remaining 32 percent said it will remain
unchanged.

Vietnam was the second optimistic
market in the region in business development prospect in 2010 with 72
percent of interviewed businesses saying their companies will reap
better results this year. Indian businesses are the most optimistic
about this prospect with 85 percent.

Although
nine out of ten Vietnamese SMEs pay attention to business activities in
the Asia-Pacific market, they also expect their growths in other
regions. Eighty-one percent of surveyed businesses forecast that
Vietnam ’s business activities will increase 61 percent in North
American and 60 percent in Europe .

Fifty-eight
percent of Vietnamese SMEs said international business has positive
impacts and opens up new opportunities for their operations. They added
that architecture-construction, information technology and tourism will
be key sectors in 2010.

Although the national
economy is forecast to keep growing this year, Vietnamese businesses are
facing a lot of challenges, particularly, high credit interest rate and
competitiveness pressure.

Vietnam’s SMEs said the government’s supportive polices are very necessary for them to improve their competitiveness./.

Saturday, December 4, 2010

US NGO is angel of mercy for small firms

The US-based Arthur B. Schultz Foundation will provide small and medium-sized Vietnamese companies interest-free loans worth a total of US$180,000.

SMEs with a sound financial position, assets for collateral, good plans to effectively use and repay the fund will be able to borrow up to $20,000, Do Thanh Long, deputy director of the Center for Economic Development Studies of the Hanoi-based University of Economics and Business, which announced the Thriive, formerly known as Social Microenterprise Initiative in Vietnam program, said.

Job creation will be the most important criteria for getting funds, he said.

Borrowers will have to repay the loan in two years, but not in cash: They have to provide free goods and services to the poor for the value of the loan.

The program focuses on SMEs in 25 northern cities and provinces, prioritizing those with women bosses.

It will help them leverage investing in fixed assets and Property-Plant and Equipment (PPEs), Long said, adding that beneficiaries will be chosen from next month and disbursement will be made from January.

In the last five years the foundation has lent $370,800 to 28 SMEs, benefiting around 80,000 poor people in Vietnam.

ABSF, founded in 1985, is dedicated to improving the quality of life around the world through supporting small business entrepreneurs, women's empowerment, and disabled mobility. It is also active in Kenya and Palestine.

Sunday, November 21, 2010

Delta SMEs urged to use idle capital

HCM CITY — Small – and medium-sized enterprises in the Cuu Long (Mekong) Delta provinces that have had difficulty accessing bank loans should make use of their idle capital, business leaders have recommended.

"The situation for recovery after the financial crisis is not easy for every SME," Nguyen Huu De, deputy director of Can Tho City's Viet Nam Chamber of Commerce and Industry (VCCI) told the conference last Friday.

De said SMEs accounted for 90 per cent of total businesses in the Delta region.

Other experts at the conference also encouraged SMEs in the region to use idle capital to re-invest in production.

Bui Van, consultant for the financial channel FBNC, said most SMEs were unaware of how to use all capital sources for production because they had not been doing business for a long time.

Dr Le Tham Duong of the HCM City Banking University proposed that banks in the region create more credit forms rather than just guaranteed loans.

"In my research, only one-third of SMEs can access capital from bank loans, and the remaining two-thirds have to find other sources, even with higher interest rates," he said.

Duong said SMEs could gain more trust from banks by improving their production and management capacity.

They should also demonstrate their need for owning advanced technology and equipment, he added.

However, Vo Hung Dung, director of the VCCI branch in Can Tho Province, told Viet Nam News that SMEs should not be blamed for difficulties in accessing capital from loans because the amount of available capital loaned by banks was taken up mostly by large companies.

The conference was co-held by the laisuat.vn economic information channel and Can Tho VCCI chapter. — VNS

Friday, November 19, 2010

Crisis impacts on two-thirds of local SMEs

Two-thirds of the small and medium-sized enterprises (SME) in Vietnam were affected by the global financial crisis but most of them said these challenges were temporary.

This is the result of a survey conducted at SMEs in 10 cities and provinces nationwide, which was announced at a seminar held in Hanoi Friday by the Central Institute of Economic Management (CIEM) under the Ministry of Planning and Investment.

Prof. Finn Tarp, coordinator and supervisor of the survey, said the business environment of SMEs in Vietnam seemed to worsen between 2007 and 2009, when SMEs faced more barriers, including the falls in both demands for products and supply of credits.

The rate of SMEs that annually survived the crisis dropped, while a large number of other SMEs were forced to halt operations, said the professor.

However, Tarp said super-small companies suffered fewer impacts from the crisis than bigger enterprises, as the crisis helped improve their business conditions, make competition less tough and push the government to offer them better assistance programmes.

According to the survey, SMEs in Hanoi, Ho Chi Minh city and the central province of Nghe An were hardest hit by the crisis, while those in the provinces of Phu Tho, Khanh Hoa and Lam Dong and Hai Phong city suffered fewer negative influences.

Almost 40 percent of the SMEs facing credit-related difficulties were in rural areas and household businesses in cities.

The survey, the sixth of its kind, was jointly carried out by CIEM, the Institute of Labour Science and Social Affairs under the Ministry of Labour, War Invalids and Social Affairs, and the Faculty of Economics at Copenhagen University.

Wednesday, November 17, 2010

Crisis impacts on two-thirds of local SMEs

Two-thirds of the small and medium-sized enterprises (SME) in Vietnam
were affected by the global financial crisis but most of them said
these challenges were temporary.

This is the result
of a survey conducted at SMEs in 10 cities and provinces nationwide,
which was announced at a seminar held in Hanoi on Sept. 17 by the
Central Institute of Economic Management (CIEM) under the Ministry of
Planning and Investment.

Prof. Finn Tarp,
coordinator and supervisor of the survey, said the business environment
of SMEs in Vietnam seemed to worsen between 2007 and 2009, when SMEs
faced more barriers, including the falls in both demands for products
and supply of credits.

The rate of SMEs that
annually survived the crisis dropped, while a large number of other SMEs
were forced to halt operations, said the professor.

However, Tarp said super-small companies suffered fewer impacts from
the crisis than bigger enterprises, as the crisis helped improve their
business conditions, make competition less tough and push the government
to offer them better assistance programmes.

According to the survey, SMEs in Hanoi, Ho Chi Minh city and the central
province of Nghe An were hardest hit by the crisis, while those in the
provinces of Phu Tho, Khanh Hoa and Lam Dong and Hai Phong city suffered
fewer negative influences.

Almost 40 percent of the SMEs facing credit-related difficulties were in rural areas and household businesses in cities.

The survey, the sixth of its kind, was jointly carried out by CIEM,
the Institute of Labour Science and Social Affairs under the
Ministry of Labour, War Invalids and Social Affairs, and the Faculty of
Economics at Copenhagen University./.

Friday, October 29, 2010

SMEs need to be better audited

Small and medium-sized enterprises should improve their auditing standards if they wish to access much needed capital, a conference in Hanoi heard Thursday.

There are about 450,000 enterprises in the country, according to Dang Van Thanh, chairman of the Vietnam Accounting and Auditing Association.

He said about 96 percent of those firms are SMEs, which contribute about 40 percent of Vietnam's total GDP.

However, he said almost every business in the country faces difficulties accessing credit.

Statistics from the State Bank of Vietnam 's Credit Department showed that just half of the 163,000 non-State enterprises had taken out bank loans, accounting for 27 percent of the country's total debt.

"It means that half of the non-State businesses, most of which are SMEs, are suffering a capital shortage," he said.

Another investigation released by the Ministry of Planning and Investment's Development Department shows that just one-third of SMEs has access to bank loans.

Nguyen Minh Tuan, deputy head of the Vietnam Chamber of Commerce and Industry's Business Development Institute, agreed that accessing credit is a problem for SMEs.

Economist Nguyen Dai Lai said banks pay particular attention to production and business plans and capital ability when they consider loan applications.

"Financial transparency and demonstrating the ability to make a profit are vital for any business that wishes to get credit," Lai said.

To meet bank requirements, participants at the conference were told about the need for independent auditing.

"Independent auditing could increase the reliability and accuracy of businesses' financial reports," Lai said.

Nguyen Thi Huong Nga, ANZ Bank's country head of Credit Risk, said financial reports need auditing certification because it increases confidence in the information provided.

"However, many SMEs are not aware of the importance of auditing in answering capital questions," said Le Thi Hong Len, head of the Association of Chartered Certified Accountants (ACCA) Vietnam.

Nguyen Thanh Trung, general director of Mazars, said financial reports are needed to access long-term credit businesses.

"Auditing is not a compulsory requirement for SME's. However, it is helpful and makes accessing credit easier," he said.

SMEs need to be better audited