Hanoi- Vietnamese businesses are having trouble getting loans from banks despite the State Bank's decision to cut the benchmark rate from 13 per cent to 12 per cent effective November 5, executives said Wednesday.

"We find it really hard to ask for loans from banks at this time," said Truong Thai Son, of Hoang Quan Real Estate in Ho Chi Minh City. "We have to cancel or delay about
30 to 50 per cent of our planned projects due to lack of cash."

Son said banks' liquidity has improved compared to six months ago, but they are hesitating to grant loans.

Domestic commercial banks are currently lending at annual rates of 16-19 per cent.

Son's company's difficulties are common among Vietnamese businesses both large and small, whether in real estate, import-export, or manufacturing.

Nguyen Thanh Hai, the chief executive officer of Vietnam Joint Stock Veterinary Development, said banks had turned down his request for a loan to import several new kinds of medicines.

Le Xuan Nghia, head of banking development strategy at the State Bank, told local media last week that local businesses, particularly small- and medium-sized ones, are thirsty for loans, but banks are holding back due to worries about an economic downturn.

Nghia said banks should resume lending to avoid a vicious circle of recession.

Following Monday's decision to cut the prime interest rate, the State Bank also requested commercial banks extend the terms of customers' loans, in order to boost sales and support local companies facing difficulties associated with the global financial crisis.

But bankers did not agree with Nghia's suggestion or the State Bank's request.

"We really want to give customers loans, but we have to consider their ability to repay debts," said Nguyen Duc Vinh, CEO of Techcombank, the country's seventh-largest lender by assets. "It is not easy to find businesses that can guarantee loans, operate effectively and pay debts these days."

Son said the State Bank's rate cuts were "a strong stimulus" to commercial banks to cut lending rates and loan more. But Son, Vinh and other businessmen said cutting the prime interest rate is not the key to boosting growth.

"Even if the prime interest rate is cut to single digits, Vietnam's economy won't get out of its stalemate unless the government takes measures to encourage consumption," such as sending out stimulus checks to families, said Vinh.

Nguyen Phuoc Thanh, CEO of Vietcombank, said sales figures were more important than rate cuts in encouraging lending. Local companies face flat sales at home and shrinking export markets, leading them to cut production and making banks less eager to extend them loans.

According to the General Statistics Office, the consumer price index decreased 0.19 percent in October, reflecting lower consumption and demand.

Trade and Industry Minister Nguyen Thanh Bien projected in October that Vietnam would earn 15.7 billion dollars from exports in the fourth quarter, a drop from the recent monthly average of more than 6 billion dollars as demand for key exports drops. (dpa)