The International Finance Corporation (IFC), a member of the World Bank Group, is helping improve the competitiveness of Vietnamese micro, small and medium enterprises (MSMEs) in the global supply chain by increasing access to supply chain finance (SCF) solutions. This will help them grow their businesses and expand into new markets, while driving Vietnam’s economy forward.

Vietnam’s foreign trade volumes have increased in recent years, with free trade agreements opening up new market opportunities for local businesses. However, a lack of working capital and transaction banking services such as SCF partially hinders producers and suppliers from accepting large orders or developing new relationships with their value chain actors.

Without SCF solutions, suppliers and distributors are not able to optimize their working capital management by converting their sales receivables and inventories into cash and obtaining lower-cost financing.

As a result, according to the National Secured Transactions Registration System, the share of receivables and inventory interest registered in the total number of security interest registrations in Vietnam is only about 30 per cent; significantly lower than those in more developed markets.

Against this backdrop, the IFC, along with the APEC Business Advisory Council (ABAC) and with support from the State Bank of Vietnam (SBV), organized the fourth annual conference on supply chain finance in Asia Pacific.

About 250 representatives from ministries and other government agencies, financial institutions, and value chain lead firms, suppliers, and distributors attended. Speakers from across the region shared their thoughts and led discussions on how to expand the SCF market in Vietnam and other emerging APEC economies.

“Building on the results of previous conferences, this year we discussed options to establish an ecosystem for SCF in emerging markets like Vietnam, where trade is growing,” said Mr. Julius Caesar Parrenas, Coordinator of the Asia-Pacific Financial Forum under the ABAC. “Local producers and suppliers urgently need efficient financing to support their trade cycles with global partners.”

Financial services are one critical element in improving the competitiveness of supply chains in Vietnam. Not only do SCF services enable suppliers and distributors to increase their working capital, they will also allow them to conduct more open-account transactions, making them more attractive to global buyers.

“This timely conference is a good opportunity for knowledge and experience sharing to promote supply chain finance in emerging markets such as Vietnam,” said Ms. Ha Thu Giang, Deputy Director of the Credit Policies for Economic Sectors Department at the SBV. “It provides government agencies with insights to improve an effective regulatory framework for supply chain finance in Vietnam.”

The IFC, in partnership with the Swiss State Secretariat for Economic Affairs (SECO), is implementing a multi-year advisory program to facilitate SCF for Vietnamese MSMEs by improving the regulatory framework, sector infrastructure, capacity of SCF providers, and awareness among MSME suppliers.

“In an export-oriented economy like Vietnam, the availability of SCF products will help local producers and exporters enhance their links to global supply chains,” said Mr. Kyle Kelhofer, IFC Country Manager for Vietnam, Cambodia, and Laos. “However, few financial institutions in Vietnam offer modern SCF services in significant scale, which is a missed opportunity both for financial services providers and businesses. Given the situation, the IFC is committed to supporting Vietnam’s players to develop and diversify the SCF market further.”