The International Finance Corporation (IFC) is providing Saigon-Hanoi Commercial Joint Stock Bank (SHB) of Vietnam with an initial US$40 million loan to help expand access to finance by small and medium enterprises (SMEs), especially those owned by women.
In a deal announced on March 21, the US$40 million facility is the first phase of an overall planned US$120 million financing package to help SHB provide more support for local enterprises and boost their participation in the global supply chain.
More than one-third of the funding will be exclusively targeted for women-owned SMEs, according to IFC, with support from the Women Entrepreneurs Opportunity Facility and the Women Entrepreneurs Finance Initiative (We-Fi) through a performance-based incentive, which encourages financial institutions to provide funding to women-owned small businesses.
SHB becomes the latest Vietnamese bank to join IFC in expanding access to finance for SMEs and the IFC investment is expected to help SHB more than double the number of SME loans as well as the outstanding loan volume for women-owned businesses by 2025. SMEs are critical to Vietnam’s economy as they generate 40% of the GDP and 50% of jobs. However, as IFC points out, they are having difficulty accessing finance, with about 62% of total SME financing needs are not being met. An IFC study estimates Vietnam’s financing gap for SMEs is around US$21.7 billion.
SHB chief executive officer Ngo Thu Ha says SMEs will be able to unlock their potential, expanding production and pursuing sustainable development with the timely support policies and solutions, and capital flows like this package from IFC.
Notably, about one-fifth of the financing package will be on-lent to SMEs participating in supply chains. This complements IFC’s ongoing advisory support to help SHB scale up its supply chain finance (SCF) business – a new segment in the local market which offers efficient and lower-cost financing solutions to suppliers participating in supply chains.
“It’s vital that smaller businesses, and especially those owned by women, are supported and able to access the funding they need to grow and expand their businesses,” says IFC country manager for Vietnam, Cambodia and Lao PDR Thomas Jacobs. “Our new partnership with SHB will help the bank strengthen its core business of serving smaller enterprises and allow those businesses to benefit from financing to link in with global supply chains, a move that will ultimately contribute to economic growth and job creation in Vietnam."
IFC is also working with international lenders to mobilize a US$50 million financing package to further improve SHB’s capacity in SME lending. A US$$75 million trade guarantee line under the IFC’s Global Trade Finance Programme (GTFP) is expected to be provided to SHB in the coming months. IFC will also advise SHB to improve its risk management and environmental, social and governance (ESG) standards.