Small companies in Vietnam struggling with limited capital are facing difficulties in securing loans from banks due to the tight monetary policies implemented by the government, lawmakers say.

Cao Sy Kiem, chairman of the Association of Small- and Medium-Sized Enterprises, told other legislators at a National Assembly meeting on Saturday that capital is now a huge challenge for many local firms.

It’s necessary for the government to tighten monetary polices to control inflation, but strong measures have a significant impact on the production sector, especially small and medium enterprises, Kiem said.

More than 30 percent SMEs in the country cannot access bank loans, he noted.

Representative Dang Van Xuong of Long An said many companies in the southern province have had to cut back on production and operational costs are eating into their capital.

If this situation does not improve soon, many companies will have to declare bankruptcy, which will lead to other job-related social problems, he said.

“Interest rates need to be lowered at all costs, or else there will be no business for enterprises,” Xuong said.

The government aims to keep credit growth at less than 20 percent this year from an earlier target of 23 percent.

The central bank on March 8 increased its refinancing and discount rates to 12 percent each, matching the level of the repurchase rate. The bank has also ordered all lenders to limit credit to non-production businesses at 22 percent of total loans by June 30, and at 16 percent by the end of the year.