Hanoi (VNA) - Though the Small and Medium Enterprise (SME) Development Fund was established a year ago, so far only three firms have got loans from it, fund director Hoang Thi Hong said.

The SME fund has a registered capital of 2trillion VND (88.8 million USD).

The three companies, which received loans worth 15billion VND, are involved in innovation and the manufacturing industry.

Since its establishment, 1,000 enterprises havebeen advised of its borrowing procedures, and 20 applied for loans worth atotal of 250 billion VND, according to Hong. However, after the appraisalprocess, the fund offered loans to only three enterprises.

The result is exceptional considering the fund’starget and its preferential policies. The fund is expected to provide loansworth 560 billion VND by 2017.

As a rule, the fund will provide businesses witha maximum of 70 percent of a project’s capital at an interest rate of 5 percentper year for one-year loans and 7 percent per year for medium- and long-termloans. The maximum loan period is seven years.

One of the advantages of the fund, compared tobank loans, is that to borrow money, businesses can use assets formed fromloans [output of their projects] as collateral. Also, usually, bank requiresSMEs to mortgage assets whose value is 100 to 150 percent of the loan. Whenborrowing from this fund, the collateral value does not need to exceed 100 percentof the loan value.

The fund has four programmes for different typesof enterprises: innovative businesses; processing and manufacturingenterprises; agriculture, forestry and fisheries; water supply, management andtreatment of waste water and waste. The maximum loan for each enterprise isbetween 10 billion VND and 25 billion VND, depending on the type of enterprise.

Nguyen Huu Quang, director of Forestry ProductsProcessing for Export Company in the central province of Thanh Haa,told Tien Phong (the Vanguard) newspaper, that the loan is not easilyaccessible to businesses. “We are expanding our factory so we need to borrowaround 20 billion VND to import machinery and equipment, but all applicationshave to wait for the evaluation of a science and technology committee as wellas the trust bank,” Quang said.

Dang Huy Dong, chairman of SME Development Fundand Deputy Minister of Planning and Investment, was quoted by the newspaper assaying that the biggest obstacle is in the process of project assessmentconducted by trust banks, and financial procedures.

Many enterprises do not have the experience in presentingtheir projects, so they are unable to convince the appraisal council, accordingto Dong.

Enterprises also fail to provide transparentfinancial information, or to have projects for the purpose that the fund hasbeen set up for.

Another problem is that businesses ask for loanshigher than the actual cost of the project. “There are situations when a companysets up many loan projects simultaneously in an effort to get some loansanctioned, or sometimes an individual represents many companies to apply for aloan,” Hong said.

In addition, the lending limit for some sectorsis too low, so it does not motivate businesses to file applications for loanswith the fund, a trust bank representative explained, on condition ofanonymity.

The SME Development Fund was established underDecision No 601/QD-TTg, dated April 17, 2013, by the then Prime Minister. It isa State-owned financial institution under the Ministry of Planning andInvestment, and its chartered capital of 2 trillion VND has been allocated fromState budget. — VNA