HANOI, Aug. 9 (Xinhua) -- There is concern that measures to stimulate credit growth in Vietnam could make loans flow into risky industries that are the most capital thirsty with high absorption capacity, local newspaper Vietnam News reported on Wednesday, citing industry insiders.
The country has required the banking industry to further reduce interest rates and pump capital into the economy as the capital absorption of the economy in the first half of 2023 hit the lowest level in the past 13 years, the newspaper reported.
Expanding credit in the current context is difficult as banks cannot lend to firms that cannot prove their ability to repay loans and are unable to manage cash flows, said Nguyen Thi Mui, a member of the National Advisory Council on Financial and Monetary Policies.
Many firms asked banks for unsecured loans, but promoting unsecured lending is not possible when the two sides have not built trust, Mui said, explaining that cheap or subprime credit is very risky and if banks are not careful, it could spillover and affect other areas of the economy.
Noting that relying on credit to boost the economy is not the safest measure, Pham Chi Quang, Director of the State Bank of Vietnam's Monetary Policy Department said it is necessary to focus on developing other safe capital channels such as the stock and corporate bond markets.
In the second quarter of 2023, the total profit of non-bank firms in Vietnam decreased by nearly 42 percent and firms no longer have high financial leverage, but are eating through capital nonetheless, according to FiinGroup, a service provider of financial data. ■
