Credit lines to help struggling firms

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Military  Bank just launched a VND10 trillion ($476 million) preferential credit package applicable until the end of 2012 with interest rates 1-1.2 per cent softer than regulated ones.

“Export firms sourcing capital to store materials for export will have their needs satisfied by our bank when they show us export document sets and pay us when they get payment from foreign banks or importers,” said MB’s Trade Finance Department head Nguyen Le Huyen.

Military  Bank reportedly inked a cooperative agreement with Vietnam Chamber of Commerce and Industry (VCCI) to deploy the credit support package across the country. Accordingly, VCCI will help promote the credit package among the business community and later send a list of firms to Military  Bank.

Earlier, several other banks had rolled out priority credit packages to small- and medium-size firms operating in production, trading  and export. For instance, Orient Commercial Bank (OCB) offered a VND2 trillion ($95.2 million) to corporate customers with interest rates from 2-2.5 per cent lower than regulated ones.

“OCB will prioritise firms with loans of VND5-20 billion ($230,000-$950,000),” said the bank’s director Trinh Van Tuan.

But not all firms are jumping for joy.

“Looking on bank lending requirements, I suppose few firms are eligible to get these lower-cost loans. Many businesses in the wood sector are small trading units falling short of bank collateral requirements,” said Nguyen Ton Quyen, general secretary of the Vietnam Timber and Forest Product Association (Viforest).

Every year, local wood export processing firms need to import four million cubic metres of wood and they source dollar loans with interest rates ranging from 6-7 per cent per year from banks.

They are facing dwindling credit lines from banks on the back of government’s tightening credit policies. This has paved the way for foreign invested firms with access to lower-cost lending of thus 3-4 per cent per year to take the upper hand in material supply in Vietnam’s wood export processing industry.

Viforest recently proposed the central bank and the Ministry of Agriculture and Rural Development consider increasing dollar loans to wood export processing firms.

In the cashew industry, according to Vietnam Cashews Association (Vinacas), the sector was in need of around VND9-10 trillion ($428.5-476 million) to purchase 380,000 tonnes of raw cashews from farmers and then $250 million to feed import and processing needs in later months of the year.