Vietnam’s regulations on credit guarantee

A notable content of Decree No. 34/2018/ND-CP of Vietnam’s Government is the regulations on credit guarantee. To be specific:

Beneficiaries of credit guarantees

- Beneficiaries of credit guarantee funds are SMEs prescribed in the Law on support for SMEs and its guiding documents, which have growth potential but are not eligible for access to credit in the preferential sectors.

- SMEs taking out loans for investment and business purposes in the following sectors are given priority to be granted extend credit guarantees:

+ Preferential sectors for credit extending under guidance of the State Bank of Vietnam in each period;

+ Sectors or projects in the preferential sectors of local socio-economic development in each period.

- According to regulations, the People's Committee of the province shall issue a list of preferential industries and sectors for local socio-economic development in each period that the Fund considers to extend credit guarantees.

Conditions for extending credit guarantees

Beneficiaries of credit guarantees are only granted credit guarantees when they meet the following conditions:

- Prepare their effective and creditworthy investment projects, production and business plans.

- Investment projects, production and business plans shall be assessed and subject to the decision to extend the credit guarantee in accordance with regulations.

- There is an investment or business plan in which the owner's equity accounts for at least 20% at the time when the credit guarantee fund considers the beneficiary for guarantee granting.

- When applying for the guarantee, the beneficiary does not incur any tax debt for 1 year or longer as prescribed in the Law on Tax Administration and non-performing loans at credit institutions. If the tax debt incurred due to objective reason, the beneficiary must have a certification of its superior tax authority.

- There are security interests for loan guarantees as prescribed in Article 25 of Decree No. 34/2018/ND-CP.

Decree No. 34/2018/ND-CP of Vietnam’s Government takes effect from March 08, 2018.

-Thao Uyen-

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