The International Finance Corporation (IFC), a member of the World Bank Group, announced on March 27 it would provide a loan of $100 million to the Orient Commercial Joint Stock Bank (OCB). The IFC-led financing package, combined with advisory services, will boost lending to small and medium-sized enterprises (SMEs), especially women-owned or led ones, and will promote supply chain finance in the country.

Comprising 98 per cent of Vietnam’s total enterprises, SMEs are the primary engine of job creation in the country, employing more than half of the workforce and contributing about 40 per cent to GDP. But around 60 per cent of SMEs have unmet financing needs - a $21 billion financing gap. Access to finance is therefore key to unlocking the potential of SMEs.

The long-term financing package comprises $57.16 million from the IFC’s own account and $42.84 million from the multi-investor Managed Co-Lending Portfolio Program (MCPP) managed by IFC. Notably, OCB aims to use at least 50 per cent of the loan proceeds to finance women-owned SMEs, with support from the Women Entrepreneurs Finance Initiative (We-Fi) - a collaborative multi-stakeholder partnership aimed at addressing financial and non-financial constraints faced by women-owned SMEs in developing countries.

“OCB sees SMEs as an important target segment to realize its strategy of becoming a leading retail and SME bank in Vietnam,” said Mr. Nguyen Dinh Tung, CEO of OCB. “The IFC’s financing package helps reinforce the bank’s continued commitment to expanding lending to this segment, enabling SMEs to further grow and improve their performance in the context of increased competition.”

This project is the first investment the IFC will make in a commercial bank under its partnership with We-Fi. We-Fi’s ambition to help expand financial and market access to women will be realized through a performance-based incentive that will help catalyze at least $50 million in loans to women entrepreneurs.

In addition to funding, in partnership with the Swiss State Secretariat for Economic Affairs (SECO), the IFC will help OCB develop its supply chain finance business. While Vietnam is an export-driven economy, few local banks offer a full range of supply chain financial services to smaller businesses. With the IFC’s support, OCB will develop an electronic supply chain finance platform to support the financing of commercial transactions in a transparent and efficient manner.

“Switzerland supports this private sector-led initiative on supply chain finance because it offers an innovative solution to address the longstanding challenge of access to finance for Vietnamese SMEs,” said Mr. Marcel Reymond, Head of Cooperation at the Embassy of Switzerland in Vietnam. “It complements other instruments within the framework of Switzerland’s support to the private sector. All Swiss initiatives aim at increasing the productivity and competitiveness of SMEs in Vietnam.”

The IFC has provided more than $400 million in financing for women entrepreneurs in Vietnam to date. The country is one of the three largest markets of the IFC’s gender finance program.

“This financing package, with its large mobilization component, is expected to have a catalytic impact on gender finance in Vietnam’s banking sector, which is at a critical juncture of mobilizing long-term private funding to support the country’s crucial goals of developing SMEs and accelerating economic growth,” said Mr. Vivek Pathak, IFC Regional Director for East Asia and the Pacific. “We share OCB’s vision of becoming a specialized SME and retail bank in Vietnam by exploring new opportunities and deploying innovative solutions to better address SMEs’ financing needs.”