SMEs in Vietnam to benefit from broader access to soft loans

A strong, effective and sustainable lending mechanism is important to remove credit barriers facing SMEs.
By: | January 28, 2021

United Nations Development Programme (UNDP) resident representative in Vietnam Caitlin Wiesen said this in relation to the government’s plans to develop a legal framework for the country’s SMEs Development Fund in terms of direct lending and trust and indirect lending services provided through commercial banks, to provide a broader access to soft loans to SMEs. 

The Ministry of Planning and Investment said since the fund was put into operation more than three years ago, it has helped SMEs enhance their operational effectiveness, increase profits, and create more jobs, stressing that many companies have paid off their loans early. 

The fund was launched by the Government in 2013 with a charter capital of 2 trillion VND (US$86.7 million). 

Last year, to help pandemic-hit businesses, the lending rates of the fund were lowered to 2.16% for short-term loans and 4.0% for medium- and long-term ones.  

Wiesen said in order to maximise the fund’s effectiveness, there is a need to have a better understanding of the financial ecosystem for SMEs in the country and the strategic role for a new lending channel to boost existing domestic funding.  

She said funding must come from both the public and private sectors to meet the ever-changing needs of SMEs. 

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SMEs made up about 98% of the more than 800,000 registered businesses in Vietnam. They create over 1 million new jobs, employ around 5 million workers, and make up some 45% of GDP and 31% of the State budget revenue annually, according to VNA.