An employee of Agribank counts cash to make loans for customers. The outstanding loans during the January-April period rose 2.11 per cent. — VNA/VNS Photo Tran Viet
HA NOI (VNS)— The outstanding loans given by commercial banks have increased 2.11 per cent since December, according to the State Bank of Viet Nam (SBV).
Foreign currency loans declined by 7.2 per cent, but dong-denominated loans climbed 4.15 per cent.
Lending to agriculture and rural areas rose 3.1 per cent during the four-month period, as Government policies to support agriculture and rural areas helped farmers and rural traders increase borrowing to expand production and business.
Real estate loans also went up 1.1 per cent in the first four months and both yearly deposit and lending interest rates were reduced by roughly 2-3 percentage points against early this year
To further help businesses, the central bank required four State-owned commercial banks to bring all their yearly lending rates below 13 per cent.
SBV also asked credit institutions to boost lending to prioritised industries, including agriculture, exports, supporting industries and small- and medium-sized enterprises. The lending interest rate cap for the industries is 10 per cent.
Total deposits by the end of April also expanded 5.2 per cent from last December.
Meanwhile, the SBV plans to carry out inspections at 18 Vietnamese lenders and seven foreign banks this year.
In the first quarter of the year, the central bank conducted 301 inspections, of which 145 were scheduled, 39 were unscheduled and 117 were examinations.
During a planned examination of BaoVietBank in May, the central bank branch in HaNoi will examine the bank's credit activities, finances and prudential ratios. — VNS
Illustrative image/Photo laisuat
HA NOI (VNS)— Sustainable interest rates and risk management were the hot topics during a seminar on the country's micro-finance institutions held yesterday in Ha Noi.
The event was organised by the International Finance Corporation (IFC) in collaboration with Switzerland's Ministry of the Economy, Tinh Thuong One Member Liability Limited Micro-finance Institution (TYM) and the Viet Nam Micro-finance Working Group (MFWG).
International and domestic experts said the seminar had offered an insight into the issues surrounding the application of interest rates in micro-finance institutions.
Through practice and experience, the IFC's working group concluded that the interest rates of micro-finance institutions were not really higher than other credit institutions and did not adversely affect their customers.
They said that the specific characteristics and activities of micro-finance institutions should be considered in order to assess and develop appropriate interest rate policies.
Risk management procedures were also discussed by the experts. Andrew Pospielovsky, an IFC's consultant, said that managing risks to any financial institution required risk identification, assessment, measurement, reduction, monitoring and evaluation.
Andrew Pospielovsky said the building of risk management culture was something micro-finance institutions had been urgently doing, particularly in the period of transition and growth.
The seminar reflected that micro-finance has been officially recognised in Viet Nam and is now part of the national financial system and has contributed towards the country's economic development. The sector is growing sustainably in accordance with standards and social responsibility. — VNS
Last update 11:00 | 17/05/2013
VietNamNet Bridge – A lot of people have fallen into a trap set by finance companies. Promising simple administrative procedures, but the companies overcharge borrowers with exorbitant interest rtes.
Commercial banks, which have been burdened with the high bad debt ratios, have been trying to tighten their lending to control the credit quality. Meanwhile, individuals can easily borrow money from finance companies, if they accept to pay the high interest rates.
Dung, an officer of a software firm in Cau Giay district in Hanoi, said he receives a lot of calls from finance companies these days which invite him to borrow money from the companies.
A credit officer told him that with the monthly income of VND10 million, he would be able to borrow VND60-100 million without having to mortgage for the loan. Especially, the officer promised to disburse money within 3 days since the day Dung submits necessary documents.
“The required formalities are very simple. You just need to show some documents and receive some calls from competent officers who will to clarify some information,” the officer said.
Duong has been told that he would have to pay 2.63 percent a month in interest rate, or 31.5 percent per annum. The rate is double the consumer loan interest rates being applied by some commercial banks.
Explaining the sky high interest rate, the officer said the loans remain very attractive to people with the fixed interest rates, simple procedures and no required collateral. The 31.5 percent per annum interest rate would be applied to the whole life of loans. Meanwhile, commercial banks now tend to float the interest rates from the 4th month of the loaning.
Duong, like many other office workers, who are believed to have stable monthly income, have been “hunted” by finance companies, because they prove to be the potential clients of the lenders.
A finance expert has warned that people may fall into the “interest rate trap” set by the finance companies. The simple procedures promised by the companies would prompt people to borrow money, even if they don’t really need capital at this moment.
“I know that a lot of people have fallen into insolvency. Their monthly income is just enough to pay the principals and interest rates, while they don’t have any money left for the daily needs,” he said.
Dung said he cannot understand why legal finance companies can lend at such sky high interest rates and they are not punished by the State Bank.
He was explained that finance companies don’t bear the control of the State Bank. “We are a foreign invested enterprises, and we don’t have to follow the State Bank’s regulations on interest rates,” a credit officer said to him.
The 2005 Civil Code stipulated that lending interest rate must not be higher than 150 percent of the prime interest rate – the rate set up by the State Bank. However, at present, the credit contracts do not bear the regulations any more, and they have been covered by the 2010 Law on Credit Institutions.
A banking legal expert affirmed that the 30 percent per annum interest rate is overly high, but this does not come contrary to the current regulations, because the rate is set on the basis of negotiations between lenders and borrowers.
A banker said finance companies are not allowed to mobilize capital; therefore, the input interest rates of the companies may be as high as the banks’ lending interest rates. The high capital mobilization cost, plus the high expenses on the retail network force them to set up high interest rates to cover expenses.
Last update 11:30 | 15/05/2013
VietNamNet Bridge – The economy showed positive signs in the first quarter of this year, the National Assembly (NA) Standing Committee was told yesterday, May 14. It was also told that GDP growth hit 4.89 per cent, up from 4.75 percent in the same period last year.
After increasing for seven consecutive months, the consumer price index (CPI) in March decreased 0.19 percent over the previous month and it rose slightly at 0.02 percent in April, the lowest rise for the period in four years.
The report was made when the Standing Committee convened its 18th session in Ha Noi yesterday under the chair of NA Chairman Nguyen Sinh Hung.
During the session, delegates will discuss preparations for the fifth sitting of the 13th National Assembly.
Addressing the session, Hung asked committee members to focus on evaluating the socio-economic situation and State budget this year, while seeking breakthrough measures for socio-economic tasks.
He suggested deputies continue reviewing the agenda for the fifth sitting of the NA, especially draft amendments to the 1992 Constitution and the draft revised Land Law.
He asked deputies to continue giving opinions on the draft amendments to the 1992 Constitution, focusing on people's rights to know. Besides, NA Standing Committee members should discuss several laws to be submitted to the NA.
The NA chairman said there was a need to conduct votes of confidence on persons holding positions elected or approved by the NA or People's Councils before the NA's fifth sitting. He described the work as a significant activity to realise NA's supreme supervisory rights.
The session went through several reports, including the Government's supplementary reports on the results of the implementation of the socio-economic development plan and State budget in 2012 as well as the first months of this year.
The NA Committee also discussed the report on the implementation of budget estimates in 2013 as well as evaluation reports of NA agencies on the issue.
- Updated : 5/15/2013 6:30:00 PM
Banking sector focuses on innovation, digitalization
(VOV) -Banks have to speed up the application of modern technology to improve services, or they will lose out to rivals on home turf.
Domestic and international bankers shared the view at the two-day Banking Vietnam 2013 conference which opened in Hanoi on May 15 to discuss increasing trends in the banking sector.
They said fierce competition requires banks to better their services through using modern and convenient technologies, aiming to woo more clients.
Electronic payments and modern banking services such as mobile banking and data archives are no longer new to Vietnamese people, but not all users have benefited from these services.
Digitalising services is considered an effective tool for domestic banks to keep up with international trends, experts said.
On May 15, experts also suggested solutions for resolving bad debts - a thorny problem of the banking sector - and accelerating the restructuring of the sector in order to improve its risk management capacity and modernize its technology.
In another round-table on fueling innovation in banking services, delegates examined ways to transform delivery channels for the financial sector and the rapidly evolving trends in mobile payments, which create both challenges and opportunities for financial institutions.
Banking Vietnam 2013 is jointly organised by the State Bank of Vietnam (SBV) Information Technology Department and the International Data Group (IDG) Vietnam.
Featuring the theme “Leveraging new technological trends to build governance capacity, operational excellence and service innovation”, the conference will touch upon the impact of information and communication technology (ICT) in enhancing competition, growth and performance of the banking sector.
In addition to the conference, Banking Vietnam 2013 also launched an exhibition on non-cash payments and a demonstration of modern banking technology.
Vietnamese banking system has to cope with the highest non-performing loan (NPL) ratio in the region, accounting for 8.82 percent of total loans, according to an SBV report in June 2012.
2013 is considered to be an important milestone for Vietnam’s banking system, when economic experts say the impact of the global economic crisis may bottom out and a new period of economic growth could begin.
Last update 14:15 | 15/05/2013
VietNamNet Bridge – The box office revenues in Vietnam increased from $7 million in 2008 to $43 million in 2012. With the increase of 514 percent in four years, from 2008 to 2012, the Hollywood Reporter ranked Vietnam as one of the 13 “hottest” growing cinema markets in the world.
"Iron Man 3" collected nearly VND20 billion ($1 million) in the first four day in Vietnam.
In Vietnam, where the law and business practices have not yet forced movie distributors to make public their box office revenues in a transparent manner, the data released by the Hollywood Reporter (USA) on May 9 is rare and considered reliable.
According to the report, Hollywood Reporter ranked Vietnam in the list of the 13 emerging markets with the hottest growth rates in Southeast Asia, the Middle East and South America. Specifically, for a period of four years, the growth rate of total box office revenues in Vietnam is up to 514 percent, from $7 million in 2008 to $43 million in 2012.
With a population of 92 million people, ranking 14th in the world, there is an ongoing race to build theaters between domestic and foreign firms in Vietnam. The appearance of new movie distributors has helped enrich the source of imported films.
Recently, Megastar announced to earn nearly VND20 billion ($1 million) from "Iron Man 3" – the opening film for the summer movie season - in Vietnam in the first four days. This is really a huge gap compared with VND7.6 billion ($364,000) which was considered a record that "Kung Fu Panda" made in the entire 2008 summer.
Photo: "Kung Fu Panda" took the whole 2008 summer to earn $364,000 in Vietnam.
Vietnam has the highest growth rate among the 13 emerging markets, followed by Indonesia - with a population of 251 million and a 171 percent increase. The following names are Taiwan, Malaysia, Ecuador, the Philippines, Columbia, Oman ... At the same time, the revenue in Europe and North America is on a decline or leveling off. These are the major markets of Hollywood, besides the world's second largest market - China.
Although Hollywood has to face some legal issues such as piracy and censorship in the emerging markets, overall, these are very potential markets.
Last update 11:00 | 12/05/2013
VietNamNet Bridge – Importers and exporters have urged the State Bank of Vietnam to slash the dollar interest rates further to 5 percent per annum. A senior executive of the central bank once promised to find the way to force the rates to 4-5 percent.
A report of the State Bank of Vietnam showed that since late January, the mobilized capital has increased again. By April 23, the deposits had increased by 5.34 percent in comparison with the end of 2012, or 50 percent higher than that of the same period of the last year.
The report pointed out that the dong mobilized capital has been increasing more rapidly than the foreign currency deposits. This, in the eyes of the State Bank, comes in line with the bank’s plan to encourage businesses to purchase foreign currencies from banks instead of borrowing from banks. This also shows the increase in the people’s confidence on the banking system.
The State Bank of Vietnam has affirmed that the foreign currency market has been going on a right track. By April 25, the average buy price had increased by 0.4 percent in comparison with the beginning of the year. The stabilized exchange rate and the dollar mobilized capital decrease are the good signs for the macro economy.
However, analysts have found that the slowdown has put a hard pressure on the dollar credit. Though the State Bank has tightened the dollar lending by restricting the subjects that can borrow in foreign currencies, the demand for dollar loans remains high, especially from export companies.
The director of a joint stock bank said in previous years, the lent capital in dollars was always higher than the deposits. However, the gap has been narrowed because of the decrease in the dollar loan demand.
Nevertheless, the sharp fall in the dollar mobilized capital has hindered the growth of dollar lending. Banks now hurry to mobilize more dollar capital by dodging the laws and attracting deposits at the interest rates higher than the ceiling rate stipulated by the central bank.
The current ceiling interest rates are 0.5 percent for the institutional clients and 2 percent for individual depositors. However, if banks really need capital, they would be willing to pay 3-4 percent per annum. The high deposit interest rates still can bring profits to banks, if they lend at 5-6 percent per annum.
In general, banks now lend dollars at the interest rates of 7-8.5 percent per annum, while only a few rice, coffee and rubber export companies can borrow at 5 percent per annum.
Import and export companies believe that when the national economy has shown positive signs, the imports and exports have bounced back, the exchange rate has been stabilized and the foreign currency reserves have increased significantly, it’s now the right time to slash the dollar interest rates.
Dao Hong Chau, Deputy General Director of Eximbank, said the bank now lends at 3.2-3.5 percent only to big and loyal clients, and 5-6 percent per annum to small and medium import-export companies.
Meanwhile, the foreign banks in Vietnam can lend at 2-3 percent per annum only. They can borrow dollars at low interest rates from foreign finance institutions and then re-lend to domestic enterprises at the rates of 5 percent and lower. This means that in order to compete with them, domestic banks need to offer more competitive interest rates.
The Ministry of Industry and Trade has proposed a State investment of VND8.5 trillion (US$404.7 million) to develop the industrial sector during the 2013-2020 period.— Illustrative image/VNS File Photo
HA NOI (VNS)– The Ministry of Industry and Trade has proposed a State investment of VND8.5 trillion (US$404.7 million) to develop the industrial sector during the 2013-2020 period.
The State funds set aside for the development of both the large and small-scale industrial sectors is 10 times as much as invested during the 2007-2012 period.
Of the sum, VND5 trillion ($238 million) will be allocated to the ministry to manage and implement programmes aimed at stimulating industrial production. The rest will be used to build national and local industry promotion centres.
The new National Industry Production Stimulation Plan until 2020 will see a change in that the ministry also proposes the funds to be used to encourage enterprises to apply clean production technology to protect the environment.
Polluting enterprises will be given financial support to move to industrial zones and complexes.
The plan targets to create 300,000 jobs at rural industry establishments, and construct waste water treatment systems for 215 industrial complexes. – VNS
Last update 08:00 | 13/05/2013
VietNamNet Bridge – The Richest has put Vietnam into the list of the five markets with the cheapest labor cost in the world with $0.39 per hour. However, the actual labor cost could be higher.
The salary and the income
With the average pay of $0.39 per hour as reported by The Richest, every Vietnamese worker receives VND1.687 million a month for a 8-hour working day and 26 working days a month. The level is equal to the minimum wage being applied in the region 4 (VND1.650 million).
The Region 4 is the remote and underdeveloped area. Meanwhile, the other regions (1,2 and 3) have the minimum wages of VND2.35 million a month.
However, the pay mechanism in Vietnam is quite complicated. There exist the big differences between the minimum wage and basic wage and the laborers’ income.
Minimum wage is understood as the floor wage set up to protect the laborers in disadvantageous conditions. It has been referred to when calculating the social insurance premiums enterprises and laborers have to pay.
Basic wage is calculated by the product of the minimum wage and the coefficient, plus allowances (lunch fee, petrol for motorbikes and telecom fees…).
Meanwhile, income means the total sum of money a laborer can receive from the employers, which comprises of the wages, extra income from extra working hours, allowances.
As such, in fact, the enterprises in Vietnam have to pay to their workers higher than the level reported by The Richest.
The latest report of the Vietnam Labor Union released after a survey in 10 cities and provinces in June and July 2012 showed that the average total income of every laborer was VND3.623 million a month.
The actual income of laborers in Region 1 (big cities) was VND4.232 million a month. The figures were VND3.787 million in Region 2, VND3.495 million in Region 3 and VND3.001 million in Region 4.
The average wage paid to Vietnamese laborers is on the rise. The Ministry of Labor, War Invalids and Social Affairs (MOLISA) is now consulting relevant ministries on the plan to increase the minimum wage from now to 2017. It is expected that the average minimum wage would increase by 15-23 percent per annum.
Every time when the minimum wage increases, the labor cost would increases accordingly.
Vietnam pays heavy price for cheap labor force
Le Xuan Thanh, Deputy Head of the Labor and Wage Policy Department under MOLISA, noted that the low labor cost policy pursued by Vietnam in the last many years helped much in attracting investment.
However, the wage ground has been continuously heightened since 1993 with 11 adjustments made. This shows that the policy on maintaining the low wages to attract foreign investment to Vietnam may fail.
In principle, in order to ensure the benefits for both businesses and workers, the wage increase should be proportional to the productivity. However, in Vietnam, while the wage increases by 10 percent every year, the productivity increases by 3.5-5 percent only. This has prompted businesses to cut down their labor force.
The 2012 annual report of the Vietnam Chamber of Commerce and Industry (VCCI) has pointed out that the labor force at businesses has decreased sharply.
VCCI’s Secretary General Pham Thi Thu Hang said in 2002-2007, every dong paid to workers could bring 18 dong in turnover. Meanwhile, in 2008-2009, the figure dropped to 16 dong.
Last update 14:30 | 10/05/2013
VietNamNet Bridge – The lending interest rates are on the decrease, which is hoped to help businesses more easily access bank loans. However, the efforts by the banks to slash interest rates would be useless if the bad debts suddenly increase.
At a recent working session with the State Bank of Vietnam, leaders of the An Giang provincial authorities insisted on the bank’s measures to rescue businesses, or they would die because of the lack of capital.
One of the measures they suggested was the delay of the implementation of the new method on bad debt classification. If the new regulation takes effect on June 1, 2013 as initially planned, businesses would not be able to borrow capital, because of their unpaid debts.
The problem is that if the Circular No. 02 is implemented, a lot of the businesses’ loans may be classified as bad debts, which would make businesses ineligible for borrowing more money from banks. If so, even if the lending interest rates go down, the capital would not reach out to businesses to ease capital thirst of the enterprises.
Tran Luc Lang, Deputy General Director of BIDV, one of the biggest commercial banks in Vietnam, said the Circular No. 02 stipulates the regulations on classifying loans in accordance with the international practice, which can help banks better manage their loans. However, Lang said, it would be a barrier for businesses to approach bank loans.
The new method of debt classification comprises of the stricter regulations for debt management. Therefore, it may happen that the businesses’ debts would be moved to the higher groups of bad debts, which would bring disadvantages to businesses.
“In general, a business can borrow money from many different banks. If a bank lists the business’ debt as “bad debt,” other banks would also have to give similar assessments. This would make it difficult for businesses to obtain loans,” he explained.
A senior executive of Vietcombank also said that if the new regulations are applied as of June 1 as previously planned, the banks’ bad debt ratios would be higher, which means that they would have to make higher provisioning against the risks.
However, more seriously, once the bad debts increase, commercial banks would have to say “no” to the businesses which ask for loans. If so, businesses would die because of the lack of capital.
Deputy President of Lien Viet Post Bank Nguyen Duc Huong has warned that if the high requirements are applied as planned, a lot of farmers would become homeless, because they are the big debtors of banks. The failed crops and the market price fluctuations have made farmers incur big losses over the last few years.
Huong said that the application of the new regulations would mean no more way for farmers, because they cannot borrow capital to resume farming, while their assets would be taken away by the banks to compensate the unpaid debts.
Huong went on to say that though banks have been trying to slash the interest rates, he is not sure if businesses can borrow money at lower costs. The problem that when the banks’ bad debts increase, they would have to make higher provisions for the loans, which would lead to the higher capital costs. If so, banks would not be able to lend money at low prices.