Black credit booms, flawed financial system The black credit, which was burning low, has flared up when the official credit channels get frozen. It has been described by economists as a serious defect of the financial system.   The current conditions of the national economy have created an ideal environment for the black credit to develop. Businesses and individuals all need capital to resume production, but they cannot access the official credit sources because they don’t have assets to mortgage for the loans, don’t have feasibility business plan. Especially, banks refuse to lend money to businesses, because they still have not paid the due debts. A recent report showed that farmers and small enterprises still find it very difficult to borrow capital from banks despite the government’s policy to increase the lending to support the agriculture production. Lai Xuan Mon, Deputy Chair of the Vietnam Farmers’ Association, to date, only VND300 trillion has been disbursed, after the Decree No. 41 on bringing capital to rural areas was promulgated. This sum is too small if noting that 70 percent of the Vietnamese population has been living on agriculture production. As the bank doors keep closed to them, businesses have to seek capital from unofficial channels. The black credit is a derivative of an underdeveloped finance market. It smolders when the national economy grows rapidly and stably, and it would flare up when the national economy meets difficulties. Le Xuan Nghia, Head of the Research Institute for Business Development, has warned that the existence and development of the black credit would shake the national financial system. Since businesses have to pay very high for the black loans, their production costs will be high which would lessen their products’ competitiveness. As a result, the businesses would sink further in the difficulties and would not be able to recover. More and more default cases have reportedly occurred in Hanoi, Lang Son, Quang Ngai and other localities, which shows that the “black credit whirlwind” has been spreading out so rapidly. In July 2013, Nguyen Van Trung and Ta Bich Lien in Lang Son province were found as unable to pay the sum of VND600 billion they borrowed from people.  In Hanoi, Ta Van Quang abused the credit to appropriate VND300 billion. In HCM City, Nguyen Thi Hoang Hoa declared the insolvency and appropriated VND500 billion. Especially, Nghia has noted that in some revealed cases, the black credit was found as having relations with the official credit. This shows that even the official credit still cannot be put under a necessarily tight control. According to Nghia, there has been no official research work about the scale of the black credit in Vietnam. However, he affirmed it is “relatively big” which exists not only in big cities, where there are petty merchants and business households who need capital to do business, but also in rural areas as well. However, Nghia believes that the black credit in Vietnam is not as too big as in China, where the black credit reportedly accounts for 20 percent of the total credit. Meanwhile, lawyers pointed out that the black credit still can exist because of the legal loopholes. A lot of the black credit default cases have been reported by local mass media, but only a few of them are brought to the court. VietNamNet Bridge,  compiled by Kim Chi