The International Finance Corporation (IFC), a member of the World Bank Group, is providing a syndicated loan of $100 million to Tien Phong commercial joint stock bank (TPBank) to further extend long-term funding to micro, small and medium enterprises, and individual borrowers through digital delivery channels.
The five-year financing package comprises $60 million from IFC’s own account, $22.5 million from the multi-investor Managed Co-Lending Portfolio Program (MCPP) managed by IFC and $17.5 million from Industrial and Commercial Bank of China Ltd., Hong Kong Branch under IFC’s B Loan Program.
Lack of financial access is one of the key challenges for micro, small and medium sized enterprises (MSMEs), which employ about 77 per cent of Vietnam’s labor force and contribute to around 41 percent of the country’s gross domestic product (GDP). About 70 per cent of MSMEs have unmet financing needs, resulting in a $23.6 billion financing gap, equivalent to 12 per cent of GDP.
Given the scenario, IFC’s long-term funding commitment would enable TPBank to double its MSME portfolio over the next five years, providing more than $1.8 billion in about 46,000 loans by 2022. Notably, up to 65 per cent of the transactions will be made digitally.
The program is also likely to improve the Vietnamese banking sector’s competitiveness by promoting a cashless economy via innovation and competition. It is further expected to create and facilitate between 35,000 and 56,000 jobs over the next five years.
According to IFC, shifting to a cashless system is a priority for the government to increase efficiency, promote business and economic development, and reduce poverty in remote rural areas where it is difficult to reach through traditional financial providers.
“The much-needed syndicated funding from IFC and international lenders will help TPBank to implement a long-term digital strategy to capture the digital demographic growth opportunity and increase its reach to the unbanked and underserved segments,” said TPBank chief executive officer Nguyen Hung.
According to IFC Country Manager for Vietnam, Cambodia, and Lao PDR Kyle Kelhofer, this syndicated facility is expected to have a catalytic impact for the Vietnamese banking sector, which is at a key juncture of mobilizing long-term private funding needed to support the country’s key development goals of developing SMEs and creating jobs.
“The large mobilization component sends a strong signal to the market, creating a demonstration effect of private sector financing for this key sector,” said Kyle Kelhofer.