ADB, Switzerland sign USD5 million cofinancing agreement to improve access to finance for SMES in Vietnam
Saturday, 06/05/2023 11:45 (GMT+7)
(CPV) - The Asian Development Bank (ADB) and Switzerland signed a cofinancing agreement of up to USD5 million to nurture financial technologies (fintech) that can help address low financial inclusion in Viet Nam, particularly among small and medium-sized enterprises (SMEs).
This funding, along with a USD2 million contribution from the Japan Fund for Prosperous and Resilient Asia and the Pacific, financed by the Government of Japan, will support a technical assistance (TA) that aims to expand inclusive and climate finance in the country.
Fintech has been at the center of the government’s plans to expand financial services to consumers and SMEs. The TA will help the State Bank of Viet Nam (SBV) to strengthen the regulatory framework for digital finance, build the capacity of government and other industry stakeholders, and assist financial institutions to develop digital banking.
“Financial institutions rely heavily on collateral-based credit decisions. This disadvantages SMEs, which typically have little or no collateral. Banks also often centralize their credit processes, making it relatively more expensive to process smaller loans,” said ADB Director General for Southeast Asia Winfried Wicklein. “This TA can help find solutions such as alternative credit scoring and introducing digital lending.”
Almost 80% of Viet Nam’s population is unbanked or underbanked. Microenterprises and SMEs are particularly affected, with their unmet financing need estimated at 500 trillion dong (around USD21 billion). Women-owned and women-led SMEs (WSMEs) are even more adversely affected. Women entrepreneurs in Viet Nam have an estimated USD1.2 billion, but few banks have taken active measures to pursue this market opportunity.
The TA will help advance women’s financing access, including through the provision of training opportunities on fintech and green banking best practices to SBV staff, targeting 25% female participation, as well as consulting services to WSMEs on preparing green loan applications.
It will also help SBV refine its policies on green banking and communicate them to finance sector stakeholders. Green banking is poised to help Viet Nam achieve the USD11 billion annual financing needed to reach net-zero carbon emissions by 2050.
“By enhancing the regulatory environment for innovative fintech solutions and building capacities of market players in digital finance, Switzerland supports Viet Nam in fostering the digital transformation of its financial sector,” said Head of Economic Cooperation and Development at the Swiss State Secretariat of Economic Affairs (SECO) and Switzerland’s Governor to ADB Dominique Paravicini. “Ultimately, this will help SMEs in Viet Nam to better access finance and expand their businesses.
Based in Bern, SECO is the Swiss Confederation’s center of expertise for all core economic policy issues, including economic cooperation and development. It implements Switzerland’s economic and trade policy measures for the benefit of developing countries. SECO’s mandate is to facilitate economic growth and sustainable prosperity in its partner countries. For more information: www.seco-cooperation.admin.ch