Cases considered for risk handling of the Credit Guarantee Fund for Small and Medium Enterprises in Vietnam

Cases considered for risk handling of the Credit Guarantee Fund for Small and Medium Enterprises in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is the Credit Guarantee Fund for Small and Medium Enterprises?

According to Clause 1, Article 2 of Decree 34/2018/ND-CP, credit guarantee fund means an off-budget financial fund which is established by the People’s Committee of province or central-affiliated city and operates for non-profit, capital maintenance and development purposes; extend credit guarantees to SMEs as prescribed in Decree 34/2018/ND-CP and relevant laws.

2. Cases to be considered and handled by the Credit Guarantee Fund for Small and Medium Enterprises in Vietnam

Specifically, in Article 7 of Circular 57/2019/TT-BTC, cases to be considered for handling risks of the Credit Guarantee Fund for small and medium enterprises in Vietnam include:

- Customers suffer financial and property losses due to natural disasters, crop failures, epidemics, fires, political risks, and wars that affect production and business activities, resulting in the customer's not being able to pay the debt (principal, interest) on time, according to the signed compulsory debt receipt contract.

- Customers go bankrupt in accordance with current law.

- The state changes policies that affect customers' production and business activities, causing customers to be unable to pay debts (principal and interest) on time as per the signed compulsory debt acceptance contract.

- Customers are exposed to risks as a result of other objective causes that have a direct impact on production and business activities, resulting in customers not being able to repay debts (principal and interest) on time, as stipulated in the signed compulsory debt acceptance contract.

- Customers with bad debts (from group 3 to group 5) according to the results of debt classification as prescribed in Clause 1, Article 36 of Decree 34/2018/ND-CP.

3. Time to consider and handle the risks of the Credit Guarantee Fund for Small and Medium Enterprises in Vietnam

The time to consider and handle the risks of the Credit Guarantee Fund for Small and Medium Enterprises is determined according to the provisions of Article 5 of Circular 57/2019/TT-BTC, specifically as follows:

- For the consideration and handling of risks falling within the Credit Guarantee Fund's competence: Risk consideration and handling takes place after the Credit Guarantee Fund receives a complete dossier of risk treatment requests from the customer or when there are risks that the Credit Guarantee Fund must handle with security assets.

- At the request of the Chairman of the Credit Guarantee Fund, the time to consider and handle risks is carried out in batches, at least every six (6) months, for the Presidents of the People's Committees of the provinces and centrally-run cities (hereinafter referred to as the Presidents of the provincial-level People's Committees).

4. Risk handling principles of the Credit Guarantee Fund for Small and Medium Enterprises in Vietnam

According to Article 4 of Circular 57/2019/TT-BTC, the risk handling of the Credit Guarantee Fund for small and medium enterprises is carried out according to the following principles:

- The risk handling of risks by the Credit Guarantee Fund must comply with the principles specified in Clause 1, Article 37 of Decree 34/2018/ND-CP.

- The consideration and handling of risky debts shall be carried out when the following conditions are fully satisfied:

+ Debts falling within the scope of risk management as defined in Article 1 of Circular 57/2019/TT-BTC

+ Customer debts at the Credit Guarantee Fund are at risk due to one of the circumstances listed in Article 7 of Circular 57/2019/TT-BTC.

- The credit guarantee fund handles risks on a case-by-case basis, based on the extent of damage and the circumstances that led to the risk specified in Article 7 of Circular 57/2019/TT-BTC, the customer's production and business situation, financial situation, and debt repayment plan.

- A customer's debt may be subject to one or more risk handling measures as prescribed in Circular 57/2019/TT-BTC.

Tran Thanh Rin

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