Private equity fund considering another loan facility for commercial bank.
The International Finance Corporation (IFC), the private equity arm of the World Bank Group, is contemplating a $57 million quasi-equity investment in the Vietnam Prosperity Joint Stock Commercial Bank (VPBank).
“The two sides are still in negotiations,” a representative from VPBank told VET. The purpose of the loan facility is yet to be revealed.
This latest move comes after the IFC arranged a $125-million syndicated loan to the bank several months ago.
The new financing will assist VPBank in “raising long-term funds for its lending program to micro, small and medium enterprises,” the IFC told DealStreetAsia.
It will potentially use the IFC Financial Institutions Growth Fund and the IFC Emerging Asia Fund, both managed by IFC Assets Management Company, to finance the deal.
The facility last year was set to expand the fund’s support for small and medium-sized enterprises (SMEs), especially female-led companies.
The $50 million loan was the first phase in a $125 million financing package from IFC to help the bank extend lending to local enterprises and help boost international trade opportunities, the IFC said in a statement.
The loan comprises $25 million from the IFC’s own account and another $25 million from Cathay United Bank.
Twenty-five per cent of the funding will be exclusively set aside for women-owned SMEs.
VPBank’s CEO Nguyen Duc Vinh said that small businesses have been the focal point of its strategy, and the IFC financial package will help accelerate its realization.
Previously known as the Vietnam Joint Stock Commercial Bank for Private Enterprises, VPBank was founded in 1993 as a dedicated bank for the retail and SME segments. It was the sixth-largest lender in terms of total assets among private banks in Vietnam in 2015 and saw a 35 per cent increase in after-tax profit, to more than $114 million, in the first nine months of 2016, according to its latest financial statement.
The record high profit helped it become the fourth strongest in terms of profit making during the period, following three major State-owned banks - Vietinbank, Vietcombank and BIDV.
“The project will facilitate increased access to finance in Vietnam, which remains one the most common constraints to business expansion, according to the 2015 World Bank Enterprise Survey,” the IFC said.
The project reiterates IFC’s aim to support SMEs in Vietnam, following its earlier syndicated loan to VPBank in September 2016 and an $18.4 million investment in TPBank in August last year.
In addition to providing long-term funding to VPBank, IFC will also help the bank diversify its funding structure and assist it in building institutional capacities close to international standards.
The IFC has been investing in and working with TPBank, ABBank and fund management firm Dragon Capital to deepen the funding routes for private companies in Vietnam.
Since the launch of its Global Trade Finance Program in the country in 2007, more than 950 guarantees have been issued by participating banks to support $4.2 billion worth of trade finance, making Vietnam one of IFC’s top trade-finance markets.