Businesses warned of low interest rate loans

VietNamNet Bridge – Sensational news has stirred up the domestic finance market, as foreign credit organizations are offering to lend billions of dollars to Vietnamese enterprises at preferential interest rates. Businesses have been advised to wary of such the loans.

Duong Thu Huong, Secretary General of the Vietnam Banking Association

Duong Thu Huong, Secretary General of the Vietnam Banking Association who was once the Deputy Governor of the State Bank of Vietnam (SBV), recalled that she once received proposals to lend capital to Vietnam with very low interest rates, even less than one percent. “We never accepted such loans. When we checked the lenders’ credentials, we found that they were all “bogus” companies trying to swindle borrowers,” Huong revealed.

“I believe that no credible financial institution will lend money at such low interest rates,” she added.

“Many times I have attended international negotiations and working sessions with real international finance companies. I know that they always lend money at relatively high interest rates, sometimes even higher than those offered by commercial banks,” Huong explained.

She went on to note that finance companies set lending interest rates based on the risks of investment and Vietnamese firms. In normal conditions, finance companies will lend at market interest rates and they will never provide loans at an interest rate of one percent per annum.

When persuading Vietnamese enterprises to borrow money, some foreign institutions claimed the money will remitted to Vietnam through the 10 leading US banks. However, Huong said this is incredible. It is not easy to remit millions or billions of dollars via banks, because international banks strictly control remittances to know the money’s origin.

Under current laws on foreign debt management, all foreign debts must be approved by SBV.

When asked why foreigners offer such big loans, Huong responded that foreign institutions require the Government of Vietnam to issue guarantees. However, if guarantees are issued, no dong will be released. The institutions may use the guarantees for their business deals in the international capital market, and when mishaps happen, they will ask for their money from the Government.

In other cases, Huong related, this is a kind of money laundering. With approval from the Government of Vietnam, the institutions will lend money through the ODA (official development assistance) channel, or lend money as commercial loans.

“As far as I know, many Vietnamese enterprises have received invitations for loans from foreign institutions and they have asked for help from SBV. However, we should not have relationships with such institutions,” Huong stated.

Nguyen Dai Lai, Deputy Director of the SBV Credit Information Centre, also maintained: “Borrowers are always required to pay deposits for the loans. It is the deposit money that foreign institutions aim to gain. A lot of Vietnamese enterprises have been deceived with similar traps.”

Lai observed that it is necessary to set up an effective management mechanism to avoid such swindles.

According to Dau tu chung khoan newspaper, a US based finance company, L2G, has promised a loan worth $4.5 billion to Vietnamese Le Hai Company, so that the company can implement a mammoth project in Tra Vinh Province.

Deputy Chair of Tra Vinh People’s Committee Tran Khieu, in a meeting with reporters, remarked that local authorities have agreed in principle on the proposal by Le Hai Company to invest in Dinh An Economic Zone. To date, Le Hai has not submitted any official project to authorities, and the company has not spent any dong on the project.

“We have instructed relevant branches to check the finances of Le Hai Company. If we find out that they are not financially capable, we will not allow the company to make an investment there,” Khieu confirmed.