Vietnam’s Private Sector Stalls: Billions in Loans Remain Untapped as Companies Struggle to Access Capital
Hanoi, Vietnam – A critical bottleneck is hindering Vietnam’s economic ambitions, despite a government initiative designed to unlock billions in credit for the private sector. Resolution 68, intended to fuel growth and diversification, is facing implementation challenges, leaving businesses – particularly small and medium-sized enterprises (SMEs) and cooperatives – unable to access much-needed funding. This breaking news reveals a widening gap between policy and reality, threatening to slow down one of Southeast Asia’s fastest-growing economies.
Resolution 68: A Promise Unfulfilled?
Resolution 68-NQ/TW, aimed at providing funding and diversifying capital sources for the private sector, comes at a pivotal moment. The private economic sector, comprising private companies, household businesses, and cooperatives, currently contributes a substantial 50% to Vietnam’s GDP and generates over 30% of state revenue. However, despite numerous state measures to promote capital support, a frustrating disconnect persists. Experts warn that a “radical renewal of the political way of thinking” is essential for success.
The Numbers Tell a Confusing Story
Official figures paint a seemingly positive picture. By the end of 2024, outstanding loans to private companies are projected to reach approximately $6.91 billion, a 14.72% increase from 2023, representing 44% of all outstanding loans in the economy. Further growth is anticipated, with economic loans expected to exceed $17.2 billion by June 30, 2025, a 9.9% rise. Loans to SMEs, often offered at preferential interest rates through the State Bank, are slated to increase by 5.71%, accounting for 17.51% of total outstanding loans.
Yet, a stark paradox exists: despite this apparent credit availability, a staggering 70% of private companies and cooperatives report difficulty securing loans. This isn’t a lack of funds, but a failure of access.
On the Ground: Real-World Struggles
The Vinh Thinh Livestock and Dairy Processing Joint Stock Company in Phu Tho province exemplifies this struggle. For years, the company has been forced to pledge its land usage rights (“Red Book”) as collateral simply to qualify for bank loans. Nguyen Tien Loc, the company’s director, laments, “We know the guidelines support companies with low-interest capital, but when we ‘knock on the door’ of the bank, we can’t access it due to very strict lending conditions.” He reports interest rates fluctuating between 9% and 11% annually, coupled with demands for mortgages on existing assets and extremely short loan terms – often just one year.
The situation is mirrored at the Minh Tien agricultural cooperative in Hung Yen province. Director Dong Thi Thu Huong reveals that despite a membership of 17 and serving nearly 230 households, the cooperative relies heavily on her personal credit and pledged family assets to secure funding. This lack of capital hinders modernization, forcing the cooperative to process longan and lychee manually. “We are in a dead end,” she states, desperately seeking access to affordable loans to upgrade facilities and meet international export standards.
Beyond Banks: A Call for Diversification
The current system relies heavily on three main sources: the development fund for SMEs, credit guarantee funds, and traditional bank loans. However, some municipalities struggle to maintain these funds due to ineffectiveness. Experts, like Pham Xuan Hoe, former deputy director of the Banking Strategy Institute, advocate for diversifying credit channels. “We need to develop credit channels and organizations that don’t rely on deposits, similar to the 400 finance leasing and consumer credit companies found globally. These organizations are willing to accept higher risk, creating an ecosystem for SMEs.”
The need for a comprehensive overhaul of the loan guarantee model is also emphasized, transforming guarantee funds into a more proactive “extended arm” of fiscal and monetary policy. Integrating these funds with relevant ministry programs – encompassing capital, training, and technology – is crucial to building a truly supportive credit ecosystem.
This situation highlights a critical need for Vietnam to move beyond simply *offering* credit and focus on *enabling access* to it. The success of Resolution 68, and the future of Vietnam’s dynamic private sector, hinges on bridging this gap and fostering a more flexible and inclusive financial landscape. Stay tuned to archyde.com for continued coverage of this developing story and in-depth analysis of Vietnam’s economic trajectory.
