The Asian Development Bank (ADB) and Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) signed a $300 million loan agreement to support the growth and productivity of small and medium-sized enterprises (SMEs) in Vietnam.
The facility is comprised of a senior unsecured A loan of $200 million provided by ADB and a B loan of $100 million provided by 12 commercial lenders and divided into a three-year tranche and a five-year tranche.
“The facility will support SMEs in Vietnam and also reaffirms our partnership with ADB in achieving poverty reduction, economic growth, regional integration, and environmental protection,” said Chairman of BIDV’s Board of Directors Phan Duc Tu.
“The loan symbolizes the long-term cooperation between ADB and BIDV for sustainable development in Vietnam.”
“BIDV’s effort to make SMEs lending a key strategic priority is aligned with ongoing endeavors by ADB and the Government of Vietnam to improve access to finance for SMEs, thereby contributing to inclusive economic growth,” said Director General of ADB’s Private Sector Operations Department Michael Barrow.
The loan will make ADB the first development finance institution to provide long-term lending to BIDV. ADB will work with BIDV to maximize the positive social and environmental impacts of the assistance by implementing an environmental and social management system. Digital finance will be promoted through the introduction of new digital products to reach financially underserved populations in rural areas including SMEs owned by women.
SMEs account for most of Vietnam’s businesses, contributing around half of total employment and 40 per cent of gross domestic product. Despite their significant contribution to the economy, SMEs still encounter numerous obstacles that inhibit their economic potential, including lack of access to finance needed to expand.
In recent years, BIDV has increasingly served the SME segment with positive results. As of 30 June 2018, BIDV had 250,000 SME customers—almost 40 per cent of total SME customers in Vietnam. Its lending portfolio to SMEs reached over VND240 trillion (roughly $10.4 billion), giving it the largest share of SME lending among the country’s banks.
BIDV’s total assets now reach over VND1.26 quadrillion ($55 billion), higher than that of Vietinbank and Vietcombank.
According to BIDV’s report for the first nine months of 2018, BIDV's pre-tax profit reached over VND 7.2 trillion (nearly $310 million). The bank targeted to achieve VND 9.2 trillion (nearly $396 million) in pre-tax profit this year.
Among the state-owned commercial banks, BIDV is under great pressure to raise capital to meet Basel II standards. This pressure was partly solved by the end of October when BIDV announced the plan on the private placement of a 15-per cent stake for the strategic investor KEB Hana Bank.
Specifically, BIDV will issue more than 600 million new shares to KEB Hana Bank to raise its charter capital from VND34,187 billion ($1.46 billion) to VND40,220 billion ($1.72 billion). After the issuance, the State Bank of Vietnam's shareholding in BIDV will drop from 95.2 per cent to 81 per cent.
The deal is estimated at around $800 million and will likely be finalized by the end of 2018 and early 2019.