Loans in US dollars are in increasingly high demand thanks to low interest rates and stable foreign exchange rates.
Interest rates on dong loans have begun to show signs of decreasing, however, the rates are still too high, far beyond the firm's financial capacity. Therefore, dollar loans, especially in the short-term, are much better, according to Hiep.
Commercial banks are offering short-term dollar loans at an average annual interest rate of only 5-7 percent, compared to 11-15 percent on dong loans, according to a recent report from the State Bank of Vietnam (SBV).
Director of a bank in Hanoi, who declined to be named, also said that the exchange rate between the dollar and dong had only fluctuated slightly thanks to an improvement in the country's foreign currency reserve, a sharp drop in the trade deficit and a crackdown on gold smuggling. He forecast that the rate would continue to be stable until the end of the year.
Due to rising demand for dollar loans and limited supply, banks are increasingly cautious about lending in the greenback and tightening rules on these loan applications.
Deputy director of the Thien Nam Lift Co Nguyen Tan Vu said his company was finding it increasingly difficult to secure dollar loans despite the firm being a regular customer at several banks and having a credit limit of $5 million.
According to current regulations, only firms that have an income stream in dollars, such as exporters, can borrow greenbacks from commercial banks.
