Supporting Businesses to Access Post-COVID-19 Funds

10:27:22 AM | 9/7/2022

After being hard hit by the COVID-19 pandemic, many companies, mostly small and medium-sized enterprises (SMEs), had to close down because of a lack of capital or hard access to capital, especially bank loans. Experts put forth many effective fundraising solutions at the recent Financial Forum 2022, themed "Fundraising strategy for businesses in new circumstances”. The event was organized by Business Forum Magazine.

According to experts present at the forum, in the first six months of 2022, credit growth increased sharply by 1.5 times over the same period of 2021. The State Bank of Vietnam sent a message on the target of keeping credit growth at 14% as set at the beginning of the year and will continue to keep a close watch on inflation to have a flexible monetary policy. Credit capital is thus forecast to be tight in the last months of the year, especially for real estate, securities and BOT transport fields where credit control policy is strict to limit risk exposure.

The corporate bond market declined in the first six months of the year, mainly resulting from market “correction” policies aimed at stable, healthy, sustainable development and protection of investor interests at the back of overheating growth in 2019-2021. The market is waiting for new policies, especially an expected decree that amends and supplements Decree 153/2020, making it difficult for many businesses to work out fundraising plans for their investment and development activities in 2022 and beyond. Although the stock market was attractively cheap in the second quarter of 2022 after the VN-Index slid and liquidity waned, it reportedly lacked lasting growth momentum.

The above context requires businesses and investors to grasp all variables of inflation, interest rates and exchange rates to seek effective funding channels to have workable plans to unlock capital flows and capture investment in low-lying areas in the remaining time of this year. In particular, helping businesses to find capital to continue their investment and business plans in 2022, as well as in the medium and long terms, has also become an urgent requirement.

Addressing the gathering, Dr. Can Van Luc said, given that Vietnam's economy is recovering strongly; macroeconomic performance is stable and core inflation is under control, there will be a huge capital need for production and business recovery and for financing rising costs and input prices. Enterprises can mobilize capital through six channels: State capital, foreign capital (like borrowings and bonds), capital markets (like stock market, fintech and investment funds), equity capital, credit capital and guarantee, and capital from partners.

However, according to Mr. Dinh The Hien, among these six fundraising channels, raising equity capital is not likely to be feasible because the stock market has declined and bond issuance has weakened. In that context, foreign direct investment (FDI) will be in the spotlight in 2022, especially when the country's FDI inflow reached US$10 billion in the first six months, up 8.9% year on year - the highest growth in five years.

Small and medium-sized enterprises (SMEs) will find it more difficult to access bank loans or they cannot issue bonds either. The best fundraising solution for SMEs is the organizational model and production advantages rather than capital size. At the same time, they will need to develop strategies for specific development stages, with a reasonably phased investment; use outsourcing services, cooperate or opt for a joint stock company model and hire professional consultants to invite financial investment partners.

Speaking of the funding for businesses, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI) Vo Tan Thanh said that, one of the four recommendations sent to the Prime Minister by VCCI on behalf of the business community at the Prime Minister's dialogue with businesses was on capital sources for their production and business activities. Currently, financial pressures on businesses are huge for post-COVID-19 restructuring and recovery. Thus, VCCI asked the Government to direct the acceleration of the Recovery Support Program approved by the National Assembly and launched by the Government. It is necessary to declare the 2% interest support as per Decree 32/2022/ND-CP. "Definitely, companies are giving high priority on fundraising matters. For its part, the Government is endeavoring to achieve macro-stability and inflation goals and empower businesses to continue their recovery. More than ever, in the COVID-19 pandemic period, capital and financial resources still offer important leverage for companies to speed up their growth pace. It is also an opportunity for investors to optimize their financial capital," he said.

My Chau (Vietnam Business Forum)