VietNamNet Bridge – Bankers are reluctant to provide loans to seafood companies, which are in a vulnerable situation and may “explode”.

The news that Luu Bach Thao, general director and chair of Anvifish, was dismissed from his posts in early July stirred up the business community. Thao then offered to sell all the shares of Anvifish he was holding. Sources said that the directors of the bank branches that provided loans to Anvifish were forced to step down.

Commercial banks now are refusing to provide loans to seafood companies which, in their eyes, are unwelcome clients.

According to Nguyen Van Kich, general director of Cafatex, in general, businesses borrow money from banks to collect materials for processing and export. After getting paid for exports, they pay bank debts and then start a new business process.

However, the businesses have recently gotten into trouble: they borrow money but cannot pay debts. Since businesses are crippled with debts, banks refuse to continue providing loans.

In order to get money to pay bank debts, seafood companies have to sell products at any price. As a result, they have triggered a “price war”, trying to offer low export prices to scramble for clients.

Two years ago, seafood companies exported catfish filets at no less than $3 per kilo. But now some companies offer $2.5 per kilo only.

As such, seafood companies have fallen into a vicious circle. As they try to boost exports by offering low prices to earn money to pay debts, they get lower profits or even take losses. And as they incur losses, they cannot access bank loans.

NM, the general director of a big seafood company in Mekong Delta, complained that though he has paid the bank debt of VND500 billion, he cannot receive new loans.

“Banks have refused to provide new loans to us because they hear about the big difficulties seafood companies are facing,” he said. “From now on we have to manage by ourselves to look for capital, while we cannot expect loans from banks anymore”.

Kich noted that since banks have closed the door to seafood companies, catfish export prices will remain low for some time.

The State Bank of Vietnam, following the government’s resolution No 14, has kicked off a credit program to serve agriculture development.

Under the program, 10 enterprises can access preferential loans to develop agriculture production projects.

Of the 10 enterprises, there is only one seafood company – Hung Ca.

VietinBank Dong Thap, a subsidiary of VietinBank, one of the biggest Vietnamese commercial banks, has agreed to lend VND1.4 trillion, while only requiring mortgaged assets for 10 percent of the loan’s value.

The bank’s managers admitted that it is very risky to provide such a big loan without mortgaged assets, saying that the bank only accepted to lend to Hung Ca because Hung Ca had been a loyal partner and was introduced by the provincial authorities.

Meanwhile, foreign banks always refuse borrowers from the seafood industry.

TBKTSG