Regulations on lending and Loan Guarantee of the Science and Technology Development Fund in Vietnam

Regulations on lending and Loan Guarantee of the Science and Technology Development Fund in Vietnam

Article 14 of the model charter issued with Circular 03/2015/TT-BKHCN regulates the lending and loan guarantee of the Science and Technology Development Fund in Vietnam as follows:

1. The Fund provides low-interest or interest-free loans for science and technology projects as follows:

- Projects eligible for interest-free loans include projects applying the results of domestic science research and technology development; applying high technology or producing high technology products; creating jobs and income in rural, mountainous, economically and socially disadvantaged areas; bringing economic and social efficiency;

- Projects eligible for low-interest loans include projects aimed at technological innovation to create high-quality and highly competitive products and services;

- The Fund lends on a reimbursable basis. Borrowers must meet the following requirements:

- Correct subjects, in compliance with current State regulations and this regulation;

- The loan application file is evaluated and approved publicly and transparently;

- The Fund lends to implement projects, scientific and technological tasks not belonging to the State’s planned programs, topics, projects, bringing economic and social efficiency to the ministry or province and not overlapping with projects already funded by other State budget programs or funds;

- Use borrowed funds for the purposes specified in the credit contract;

- Have financial ability to fully and timely repay the loan.

- Loan amount and decision-making authority within the scope of the Fund's capital source, appropriate to the Fund's annual capital usage and financial revenue-expenditure plans approved by the Fund Management Council.

- Loan term determined based on the Fund's capital capacity, the specific conditions of the borrowing project, and the borrower's repayment ability, but not exceeding 60 months. Special cases are decided by the Fund Management Council.

- Loan interest rate:

- Interest-free loans for projects applying the results of domestic science research and technology development;

- Loans with interest rates equal to the State’s investment credit interest rates, as decided by the Minister of Finance from time to time, for technology innovation projects;

- The Fund Management Council decides on interest-free or low-interest loans for each specific project based on the Fund Director’s proposal;

- For cases of low-interest loans from funds mobilized outside the budget to implement science and technology projects/programs, the loan interest rate is announced by the Fund at each time, based on the agreement between the Fund and domestic and foreign financial institutions, banks that provide preferential loans;

- The lending interest rate regulated in this article is a fixed rate throughout the loan period for project implementation.

- Loan security:

- The Fund lends based on secured assets in the form of collateral, property mortgages, and other security measures if any, according to legal regulations. The procedures for securing loans and handling secured assets follow the regulations on secured transactions and relevant legal provisions;

- In cases of unsecured loans for investment projects, the Fund Management Council will review and decide.

- Annually, the Fund establishes a risk reserve to cover potential loan losses. The risk reserve fund establishment, risk handling, and risk handling authority follow legal regulations.

2. The Fund provides loan guarantees for science and technology projects as follows:

Conditions for the project owner to receive loan guarantees:

- The project has been appraised for a loan by another credit institution and has a written request for a loan guarantee submitted to the Fund;

- The financial plan and loan repayment plan are accepted by the Fund;

- There are secured assets in the form of collateral, mortgage acceptable to the Fund.

The guarantee amount and authority to decide the guarantee amount shall not exceed the loan amount.

The loan guarantee term is determined according to the loan period agreed upon between the project owner and the lending credit institution for project implementation, but not exceeding the Fund's regulated lending time frame.

The project owner receiving the loan guarantee must pay the Fund a guarantee fee as a percentage (%) of the total guaranteed amount. The specific rate follows current guidelines from the Ministry of Finance.

Note: The lending and loan guarantee activities under these regulations are carried out by the Fund through entrustment to credit institutions. The Fund evaluates and selects lending and loan guarantee tasks based on scientific and technological criteria. The total annual lending and loan guarantee amount shall not exceed 20% of the Fund's charter capital. The total outstanding loan and loan guarantee balance shall not exceed 50% of the Fund's charter capital.

More details can be found in Circular 03/2015/TT-BKHCN, which comes into effect in Vietnam from  April 23, 2015.

Ty Na

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