COVID-19: Employee wage support for businesses from Government’s non-interest loan package

Forty businesses have received more than 6 billion VND in total from the Vietnam Bank for Social Policies, making them the first businesses to avail of the package.

A representative of the Vietnam Bank for Social Policies gives a loan disbursement contract to an employer in the central province of Quang Binh. Photo: VNA

According to VNA, these businesses have received money from the Government’s non-interest loan package of 62 trillion VND (2.7 billion USD) to pay salaries to nearly 1,200 employees who have stopped working due to the serious impacts caused by the COVID-19 pandemic.

The Vietnam Bank for Social Policies was assigned to disburse the Government’s loan package for employers to pay salaries for workers in May, however, it had failed to do so due to the strict conditions.

To help businesses access the loans, the bank recently simplified conditions to make employers eligible for a loan when their employees, who hold social insurance cards, must stop work for at least one consecutive month from April 1, 2020, to December 31, 2020.

The businesses’ revenue in the first quarter of this year decreased by 20 percent compared with the fourth quarter of the last year.

The loan term is negotiated by the bank and employers, with a maximum of 12 months. The overdue debt interest rate is 12 percent per year.

Customers are not required to provide loan guarantees.

Nationwide branches of the Vietnam Bank for Social Policies have been working with customers to complete procedures for disbursement. The disbursement will be carried out on January 31, 2021.

The 62 trillion VND package is the first of its kind the Government has offered to support people affected by the COVID-19 pandemic.

The Ministry of Labour Invalids and Social Affairs (MoLISA) recently proposed the Government provide a second package of 18.6 trillion VND to help businesses develop production and business, and employees to borrow preferential loans to restore and maintain jobs.

Beneficiaries include small- and medium-sized enterprises, cooperatives and business households, with priority given to small and micro enterprises (less than 10 employees), cooperatives, household businesses and workers in rural areas.

The estimated loan amount for production and business establishments is 2 billion VND, and 100 million VND for workers, with zero interest rate for 12 months.

The third-quarter macroeconomic report of the Institute for Economic Research and Policy (VEPR) showed the policy of directly supporting employees had not shown effectiveness in practice. As of mid-August, only more than 16 million people from different groups of workers received support from the first package, with 17 trillion VND disbursed, accounting for 19 percent of people in need.

Tu Anh