Under the newly-issued Decree No. 34/2018/NĐ-CP, the state will hold 100 percent of charter capital of the funds, which operates under the model of one-member limited liability companies. The funds will be set up by the provincial People’s Committees for non-profit purposes.
SMEs can get loans from the credit guarantee funds
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According to the decree, the actual charter capital at the time of setting up the funds must be at least VND100 billion (US$4.4 million) and is allocated by the provincial budget.
The drafted list of the fund’s members includes the chairman, supervisor, director, deputy director and chief accountant, who must be qualified for the positions as legal regulations.
To be beneficiaries of the funds, firms must satisfy criteria of SMEs under the Law on Supporting Small and Medium Enterprises.
Besides having effective production and business projects appraised by the credit guarantee funds, they must be also solvent to pay the loans and have equity of 20 percent of the projects’ investment capital.
In addition, at the time of applying for guaranty, the firms are required to have no tax arrears from more than one year under the Law on Tax Management and non-performing loans at credit institutions.
In case of having tax arrears due to objective reasons, the firms must get certification from the tax agencies, which will take measures to ensure the loan guarantee according to the legal regulations.
SMEs currently account for more than 90 per cent of the country’s total number of businesses. But despite being the backbone of the country’s economy, SMEs are facing many challenges in accessing funding to upgrade technology to boost productivity and competitiveness.
The cumbersome procedures involved in getting loans also make it harder for SMEs to operate. Most lenders demand mortgage of assets which is a big problem for SMEs.
Nguyen Dinh Tue, director of the Centre for Supporting Small and Medium Enterprises, said because of financial constraints, SMEs cannot upgrade their technologies or improve productivity to compete on price.
To support SMEs, the government needs to create a healthy business environment and reduce issues like red tape and harassment. Besides, to help them access credit, the government should share their risks to reduce their mortgage burden, Tue said.
According to Do Phuoc Tong, chairman of the Ho Chi Minh City Association of Mechanical Electrical Enterprises, since SMEs lack new technologies and research and development capacity, they usually work as sub-contractors for big companies or second- and third-class suppliers, mainly handle raw materials and assemble products with very low value addition.
Besides, Vietnamese consumers’ preference for “foreign brands” is also a big challenge for SMEs.
Tong said there are Vietnamese products that match the quality of foreign-made items, but they are not accepted in local markets until they are exported to overseas markets like Japan, South Korea, Taiwan and Thailand and imported back to Viet Nam.
Export-import enterprises claimed it is because Vietnamese export products are “better” than local ones though local manufacturers said they are of the same quality.
Whatever the reason is, the fact remains that enterprises have to bear the logistics costs of sending their products overseas to sell them at home.
