THANG LONG BRANCH
1. Suggestions to ACB Thang Long branch
According to recent Ministry of Planning and Investment’s research, at the present time, there was merely 30% of SMEs which had enough capacity to access the capital from bank loans. On the other words, 70% SMEs who want to borrow from the bank could not access to that source of capital. High interest rate in bank results in the moderated operation of enterprises because SMEs’ return or profit at the end of the day could not exceed the interest rate expense. Up to a point, only big and reputable enterprises could meet bank’s requirements. Majority of experts believed that mobilized interest rate in many banks was too high that it was very difficult for SMEs to borrow money. Furthermore, complex and long procedure in lending leads SMEs feel overloaded to be lent. According to the SBV’s requirement, credit growth in 2011 could not exceed 15% instead of 45% in the previous year. Consequently, SMEs, without doubt, is in the situation of lacking capital from loan. Although some fortunately meet the requirement of banks, they still find hard to pay back principle and interest due to extremely high interest rate. In fact, a huge number of SMEs have good historical business but in 2011, they still got trouble in repayment, thus lower rate of lending quality at banks.
Understanding those enormous difficulties, it is the bank who should take some actions that can be done to address problems constructively and then raise the quality of lending to SMEs. Some suggestions will be represented in the following parts.
Raising the percentage of long term loan in total outstanding loan for SMEs:
As analyzed in the previous part, there was an inverse relationship between short term loan proportion and long term loan proportion in total outstanding loan for SMEs with rises in the former being mirrored by falls in latter. Admittedly, high proportion in
short term loan (about 60%) means high liquidity and less risk for bank. But too low rate in long term loan (nearly 16% in 2011) could affect significantly to profit of bank and also business performance of SMEs. With short term loan, SMEs could not invest more or expand business. Abundant potential projects have to cancel due to lack of long term capital. Consequently, economic recovery seems impossible when no enterprise can do business as normal. All things considered, the most obvious approach which could benefit both ACB Thang Long branch and SMEs is to increase the proportion of long term debt for SMEs to about 20-25% compared to only 16% at the present time. Enlarging long term loan does not necessarily means the number. It must compliance with high quality which is ensured by looking carefully to business planning or capacity of SMEs.
Diversifying customers, reducing state-owned enterprises involvement:
The percentage of state-owned enterprises in total loan at ACB Thang Long branch declined marginally from 48% in 2009 to 42% in 2011. However, this decrease level appears to be not strong enough. The weaknesses of State-owned enterprises are clearly showed in recent years, including: weak capacity to generate profit, unfair management system, ineffective operation… Almost state owned enterprises do not have collateral which means a lot of potential risk for banks. It is becoming worse when a number of these enterprises use capital to invest in unprofitable field, which is unacceptable. The belief in those enterprises was reduced so sharply that bank should be careful in lending to them. To tackle this problem, lowering the proportion of state- owned enterprises is necessary step. It is not discriminatory but wise practice for bank when producing more opportunity for other type of businesses to access lending capital, especially SMEs sectors with much more suitable lending purposes.
Diversifying customers is another name for this recommendation.
Supporting policy for SMEs:
Debt restructuring, reschedule loan, preferential credit to SMEs is some of supporting policy that bank is encouraged to do. As long as SMEs prove that they have
enough income to pay for debt, they are still good customers. Moreover, developing financial leasing is the further step for ACB Thang Long branch. By this, SMEs can have more opportunity to gain technology innovation, transferring business to be success. All in turn help SMEs to pay all debt and reduce bad debt ratio in bank.
Customized products and package of products are two other good possibilities for banks.
Customized products for SMEs:
At the present time, banks provide fairly wide range of services to customers.
However, services and services that actually serve the need of customers are still deficient. Customers of SMEs want to have more specific products from banks such as assisting payment management and cash flow management, maximizing return from idle capital and protecting customers from risks. Those are some that traditional bank has yet to supply. It is the fact that almost banks offer the same products and services to SMEs. However, each SME certainly have different and more specified needs. Bank can greatly support those customers by giving them advices and find out the best solution or product that suit with their demand.
Let take Standard Chartered bank as an example. In here, each customer was taken care by one professional relationship management advisor. They are well trained to be able to offer comprehensive advices and solutions to all problems of enterprise. It is obvious that Standard Chartered is one of bank doing this part really well, thus was praiseworthy when receiving the award “Best bank for SMEs”
Moreover, a package of products to customers would be a more feasible approach to both SMEs and banks. First and foremost, SMEs will be given better when they receive more fully covered products which then facilitate their operations. It appears to be much easier when customers could go to the bank, asking for all required services which are from collection, payment account, paying wages through account to global banking services, foreign exchange, investment… SMEs thus could benefit by lower