Vietnamese Businesses Seek Stable, Predictable Lending Rates
Twenty-eight Vietnamese banks have announced cuts to lending rates, but some businesses say their borrowing costs may not fall immediately. They want transparent, stable rates so they can price orders and plan production and investment.
Twenty-eight banks in Vietnam have announced cuts to lending rates, but some businesses say their actual borrowing costs may not fall as soon as the banks announce the cuts. For companies that must calculate order costs in advance, the stability and predictability of interest rates also affect financing and business decisions.
At a discussion on interest rate cuts held on November 9, Mạc Quốc Anh, vice chairman and general secretary of the Hanoi Small and Medium Enterprises Association, said rates on some loans had remained high, putting pressure on the cash flow of businesses that need substantial working capital or face long payment cycles. Construction, textiles and garments, agricultural processing, and logistics businesses, in particular, must pay for materials, production or operations before receiving payment.
The State Bank of Vietnam has instructed credit institutions to reduce deposit rates by about 0.5 percentage points in practice and to cut lending rates, giving priority to reductions of 1.5 to 2 percentage points for loans to priority sectors and for production and business activities. Mạc Quốc Anh said that a company maintaining a loan balance of VND 10 billion throughout the year could save about VND 150 million to VND 200 million in interest if it received the full 1.5 to 2 percentage point reduction for the entire year.
Phạm Quang Anh, head of Dony Garment Manufacturing Co., Ltd., said the company has reduced its reliance on bank loans because of concerns about interest rate fluctuations. It uses more of its own funds and manages risk by keeping cash reserves, negotiating payment terms and leasing equipment. This eases the pressure of principal and interest payments, but may also slow expansion.
Phạm Quang Anh, head of Dony Garment Manufacturing Co., Ltd.（VietVance）
Mạc Quốc Anh recommended clearly disclosing the reference rate for loans, the size of adjustments and their effective dates, and considering adjustments every three to six months so businesses can forecast debt servicing costs. He said the impact of rate cuts should also be assessed by the rates businesses actually pay, the number of businesses obtaining loans and the time taken to approve credit, rather than by banks’ rate cut announcements alone.
Source: VietVance
