Japanese SMEs seek loans from Vietnamese banks

VietNamNet Bridge – Analysts have noted a growing trend of Japanese small and medium enterprises (SMEs) in Vietnam borrowing money from Vietnamese banks, rather than receiving capital from holding companies or borrowing from home banks.

According to Sachiko Hayakawa from the Japan Finance Corporation (JFC), the current number of Japanese SMEs in Vietnam is triple the figure of five years ago. It is estimated that 315 Japanese SMEs are operational in Vietnam, many of which want to borrow capital from Vietnamese banks.

Hayakawa said JFC has been running programs to support Japanese SMEs in Vietnam, including the guarantee/standby letter of credit. It has also been supporting the SMEs who seek capital in local currencies through loan guarantees.

JFC has signed a cooperation agreement with Vietinbank, one of Vietnam’s biggest commercial banks, on the bank’s provision of preferential loans.

Once Japanese SMEs can access bank loans at low interest rates right in Vietnam, their holding companies in Japan do not have to remit money to Vietnam and convert Japanese yen into Vietnam dong. Hence they can avoid the risks inherent in exchange rate fluctuations.

Nguyen Tran Kien, a senior executive of Vietinbank, said the bank has provided loans to SMEs introduced and guaranteed by JFC. The businesses need capital to buy the equipment necessary for their production, or to implement their long term business plans.

Vietinbank lends in both Vietnam dong and US dollars. Every business can borrow up to VND110 billion at the preferential interest rates which are one percent lower than the average market interest rates.

A banker has commented that lending to Japanese SMEs can be a good strategy for Vietnamese banks to follow, to foster lending. He thinks that most of the Japanese businesses in Vietnam want to borrow from Vietnamese banks.

Under current regulations, businesses in Vietnam can only borrow in foreign currencies if they can prove that they have income in foreign currencies – that is, that they are in a position to repay their bank debts. The majority of Japanese businesses in Vietnam are import & export companies, which means that they can satisfy the requirement.

The banker commented that the 3 percent per annum interest rate applied by Vietinbank to its Japanese clients is “reasonable”. Japanese businesses find it more beneficial to borrow in Vietnam than in Japan, where they, as SMEs, usually bear high interest rates, and bear the exchange rate risks.

According to JFC, those Japanese companies which are overseas subsidiaries of Japanese groups are facing some problems, including the inability to predict exchange rate fluctuations as well as business prospects.

Meanwhile, they have trouble mobilizing enough capital for overseas subsidiaries. A higher percentage of Japanese businesses in other countries reportedly do not have transactions with local banks or feel insecure when making transactions with them.

In the latest news, BIDV, a bank with total assets of $26 billion, has signed a cooperation agreement with the Japanese Johnan Shinkin Bank. Under the agreement’s terms, BIDV will provide services to Japanese businesses which are Johnan Shinkin Bank’s clients when they operate in Vietnam.


Japanese SMEs, vietnamese banks