IFC Promotes Supply Chain Finance in Vietnam, Improving Competitiveness of Local MSME Suppliers

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 solutions. Subsequently, this will help them grow their businesses, expand into new markets, and drive Vietnam’s economy.

Vietnam’s foreign trade volume has increased in recent years, with free-trade agreements opening up new market opportunities for local businesses. However, lack of working capital and transaction banking services such as supply chain finance (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 to cash and obtain lower-cost financing. As a result, according to the the National Secured Transactions Registration System, the share of receivables and inventory interests registered in the total number of security interest registrations in Vietnam is just about 30 percent, significantly lower than those in the more developed markets.

Against this backdrop, IFC — along with the APEC Business Advisory Council (ABAC) and with the support from the State Bank of Vietnam — 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 the event. Speakers from across the region shared their thoughts and led discussions on how to expand the SCF market in Vietnam and other APEC emerging 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. Local producers and suppliers urgently need efficient financing to support their trade cycles with global partners,” said Julius Caesar Parrenas, Coordinator of the Asia-Pacific Financial Forum under ABAC.

Financial services are one of the critical elements for 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. It provides government agencies with good insight to improve an effective regulatory framework for supply chain finance in Vietnam,” said Ha Thu Giang, Deputy Director of the Credit Policies for Economic Sectors Department, State Bank of Vietnam.

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

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

About IFC
IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities where they are needed most. In fiscal year 2019, we delivered more than $19 billion in long-term financing for developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org

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