Only 30% of clients can borrow money

According to the State Bank of Vietnam, 90% of the applications for loans were approved in October. However, analysts say that applications were only submitted after borrowers had been preliminarily checked by banks’ staffs who concluded that the clients might be eligible for loans. The number of clients who were told to submit applications was just 20-30% of that which had a demand for loans.

 The analysts also said that the clients who were approved for loans were mainly loyal clients who had credit relations with banks, while very few new clients got loans.

 Banks’ spirit willing but flesh weak

Bankers said that they really want to push up loaning at this moment, but they have their own problems. The input interest rates remain high as banks mobilised capital before at high interest rates; therefore, they cannot slash lending interest rates right now. Meanwhile, as their capital is mostly short term (3, 6 or 9 months), they cannot fund long-term projects. Meanwhile, the good clients that banks really want to lend to are not really interested in borrowing money at this moment, as they expect interest rates to go down further.

 Moreover, the happenings of the world’s economy remain unpredictable, which means high risks for banks and requires banks to spend more time and efforts to check the feasibility of projects.

 Demand for capital not likely to increase

 The fact that the government and localities have delayed the implementation of big projects not only has narrowed the outlets of commercial banks, but also affected the number of orders of businesses, thus limiting the demand for capital to fulfill orders. Meanwhile, big clients, including economic groups and general corporations in some business fields now can borrow money from the Vietnam Development Bank, so they do not seek capital from commercial banks.

The director of a branch of a commercial bank said that the bank plans to push up loaning, but the capital absorption is not as big as expected. Even if the central bank removed the limit of 30% in credit growth rate for 2008, banks would not be able to obtain a higher level.

 Lending interest rates to go down further

Bankers are well aware that 18% per annum remains an overly high interest rate for most clients; therefore, they will have to slash interest rates if they want to increase outstanding loans.

A financial expert said that the interest rates need to go down further. Now the borrowers, or the capital buyers, have more power than the sellers, or bankers. Borrowers can pay bank debts before the maturation to borrow other loans at lower interest rates.