Black credit still existing ‘cause market not transparent enough
VietNamNet Bridge – Black credit is considered illegal in Vietnam. However,it still has exists for the last many years, simply because the demand is alwaysvery high.
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The businessman smiled, said that he knows well that if he contacts banks, hewould be able to borrow the money he needs. However, the bank would disburse themoney only after one month.
“The situation would be quite different after one month, and my opportunitieswould be missed,” the businessman said.
After making several calls, the businessman found a lender who accepted to lend700 million dong at “reasonable” interest rates.
The businessman, like many other Vietnamese businessmen and small merchants,prefer borrowing money on the black credit market, to seeking loans fromcommercial banks, even though the interest rates on the market are alwaysexorbitant.
In principle, commercial banks are the right addresses for businesses to contactwhen they need working capital. However, it is never easy to borrow money frombanks, as credit officers always cite hundreds of regulations stipulated in thelaws, government decrees and circulars that involved parties have to follow. Inorder to obey the regulations, borrowers have to follow complicated proceduresand show a lot of necessary documents.
Therefore, borrowers can only get money tens of days or one month after theycontact banks. Meanwhile, in doing business, tardiness always means missingopportunities and losing money.
If borrowing money from the black credit market, borrowers can easily get moneyafter several hours.
This explains why black credit market has existed for the last many yearsdespite the great efforts by the local authorities to eliminate them.
Of course, when businessmen want to borrow money from the black credit market,they have to accept high interest rates. Here, in the market, the rule “highrisk, high interest rate” also exists. This means that when lenders accept tolend money without requiring complicated procedures, they need to set up highinterest rates in order to cover risks. In general, the interest rates appliedon the black credit market are always 3-4 times higher, or sometimes 7-8 timeshigher than the official interest rates.
Explaining the existence of the black credit, Dr Nguyen Van Nam, former Memberof the Prime Minister’s Research Team, said that credit institutions’ operationhas been leaving “too much space” which is the “fertile land” for the blackcredit to develop.
The above said businessman said that black man is the “fellow-passenger” ofsmall merchants, who have to pay high interest rates, but can get money soon toserve their business deals.
Especially, when borrowing money on the black credit market, no borrowers haveto pay the “under table fee”. Meanwhile, if borrowing money from banks,borrowers usually have to pay additional fees to bank credit officers, whichmakes the actual lending interest rates higher than the quoted rates.
The black credit also proves to be a helpful method to those, who want to getrich quickly. A businessman said that he has become a billionaire because he hasused the capital left by the late mother in the “most reasonable way”. He haslent the money and made the capital multiply.
However, like any other “black” things, black credit is really risky to bothlenders and borrowers. In case of dispute, they are not protected by the laws.
Dr Nam believes that the black market still exists, because the economy is “notwhite”, i.e. it still lacks the transparency. Therefore, the only way to controlblack credit is to perfect the legal framework and make the national economytransparent.
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