Of about 600,000 formal active SMEs, only 30 percent could access bank capital with the total loan amount accounting for just three percent of the banks’ portfolio. As Vietnam aims to emerge as a manufacturing and commercial hub in South East Asia, long-term funding for SMEs is becoming increasingly critical. Also, the rapid urbanization is creating a demand for housing in major cities, which is estimated at 374,000 units in big cities annually.
Given the scenario, IFC’s long-term funding commitment would enable VIB to double its SME and affordable housing portfolios over the next five years, lending more than US$1 billion in total.
“The much-needed syndicated funding from IFC and participating banks will help grow VIB’s SME and affordable mortgage portfolios, positioning the bank a leader in these segments,” said Han Ngoc Vu, VIB Chief Executive Officer. “The long-term financing is particularly relevant in Vietnam, where debt markets are still nascent, limiting the funding channels and options for financial institutions.”
The five-year financing package comprises US$100 million from IFC and US$85 million from three international lenders including Cathay United Bank Co. Ltd, Industrial and Commercial Bank of China Ltd. (Hong Kong Branch), and Thailand’s Kiatnakin Bank Public Company Ltd.
“This syndicated facility marks a milestone for VIB and other local privately owned banks in Vietnam to access long-term funding from foreign commercial lenders, enabling them to grow longer-term financial products such as residential mortgage lending,” said Kyle Kelhofer, IFC Country Manager for Vietnam, Cambodia and Lao PDR. “This project will support the country’s key development goals of creating jobs, developing SMEs, and promoting industrialization and urbanization.”
VIB joined IFC’s Global Trade Finance Program in 2011, and the current trade line of $120 million has enabled it to help local companies increase their import and export activities and create jobs. IFC also advised the bank on SME banking to effectively and sustainably serve the SMEs, one of its strategic segments.