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Publish Date : 03-Apr-2019

IFC, a member of the World Bank Group, is providing a loan of $100 million to Vietnams Orient Commercial Joint Stock Bank (OCB). The IFC-led financing package, combined with advisory services, will boost lending to small and medium enterprises (SMEs), especially women-owned or led ones, and will promote supply chain finance in Vietnam.

Comprising 98 percent of Vietnams total enterprises, SMEs are the primary engine of job creation in Vietnam, employing more than half of the labor force and contributing about 40 percent to the gross domestic product. Yet, around 60 percent of SMEs have unmet financing needsa $21 billion financing gap. Access to finance is therefore key to unlock the potential of SMEs. The long-term financing package comprises $57.16 million from IFCs own account and $42.84 million from the multi-investor Managed Co-Lending Portfolio Program (MCPP) managed by IFC. Notably, OCB aims to use at least 50 percent of the loan proceeds to finance WSMEs, with support from the Women Entrepreneurs Finance Initiative (We-Fi)a collaborative multi-stakeholder partnership aimed at addressing financial and non-financial constraints faced by WSMEs in developing countries.

OCB sees SMEs as an important target segment to realize its strategy to become a leading retail and SME bank in Vietnam. IFCs financing package helps reinforce the banks continued commitment to expanding lending to this segment, enabling SMEs to further grow and improve their performance in the context of increased competition, said Nguyen Dinh Tung, OCB Chief Executive Officer. This project is the first investment IFC will make in a commercial bank under its partnership with We-Fi. We-Fis ambition to help expand financial and market access to women will be realized through a performance-based incentive that will help catalyze at least $50 million in loans to women entrepreneurs.

In addition to funding, in partnership with the Swiss State Secretariat for Economic Affairs (SECO), IFC will help OCB develop its supply chain finance (SCF) business. While Vietnam is an export driven economy, currently few local banks offer a full range of supply-chain financial services to smaller businesses. With IFCs support, OCB will develop a supply chain finance electronic platform to support the financing of commercial transactions in a transparent and efficient manner.

Switzerland supports this private sector-led initiative on supply chain finance because it offers an innovative solution to address the longstanding challenge of access to finance for Vietnamese SMEs. It complements other instruments in the framework of Switzerlands support to the private sector. All Swiss initiatives aim at increasing productivity and competitiveness of SMEs in Vietnam, said Marcel Reymond, Head of Cooperation, Embassy of Switzerland in Vietnam.

IFC has provided to date more than $400 million in financing for women entrepreneurs in Vietnam. The country is one of the three biggest markets of the IFCs gender finance program. This financing package with its large mobilization component is expected to have a catalytic impact for gender finance in the Vietnamese banking sector, which is at a critical juncture of mobilizing long-term private funding to support the countrys crucial goals of developing SMEs and accelerating economic growth, said Vivek Pathak, IFC Regional Director for East Asia and the Pacific. We share OCBs vision to become a specialized SME and retail bank in Vietnam by exploring new opportunities and deploying innovative solutions to better address SMEs financing needs.

IFC and OCBs partnership started in 2011 with a trade finance guarantee of $20 million under IFCs Global Trade Finance Program. IFC provided additional financing with a $25 million loan in March 2012 and a revolving short-term liquidity of $10 million. This partnership allowed the bank to increase financing to more small and medium enterprises and women-owned businesses and help more local companies increase trade and create employment opportunities.

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