The International Finance Corporation (IFC) is lending US$140 million to Vietnam Prosperity Joint Stock Commercial Bank (VPBank) and Orient Commercial Joint Stock Bank (OCB) to help them support their clients, especially small and medium enterprises (SMEs) impacted by Covid-19. The additional financing, announced on August 4, is aimed at assisting local businesses with disrupted cash flows to sustain operations and maintain jobs.
The pandemic, IFC notes, has severely impacted Vietnamese SMEs, a key driver of Vietnam’s economic growth over the past two decades. Guided by the State Bank of Vietnam, VPBank and OCB have implemented various relief measures for SME clients affected by the crisis.
As part of its Covid-19 fast-track financing support package, IFC is providing VPBank with US$100 million and OCB with US$40 million in one-year renewable senior loans. The funding will provide the two banks with additional liquidity to continue lending to businesses while offering payment relief to their borrowers at the same time.
IFC is also partnering with international lenders, including the Asian Infrastructure Investment Bank (AIIB), to mobilize an additional financing package to further expand VPBank’s lending capacity to affected local businesses. AIIB will be co-financing up to US$100 million to support VPBank’s trade finance and working capital finance to Vietnamese enterprises during the pandemic. This is AIIB’s first intermediary financing in Southeast Asia that will target the private sector and its first project in Vietnam, which will provide critical liquidity support and working capital into the market.
VPBank CEO Nguyen DucVinh describes SMEs as a strategic client segment for the bank, adding that it has continuously offered various solutions to their requirements during the pandemic. “IFC’s working capital line will enable VPBank to assist much more businesses, helping them weather an external acute shock as well as supporting broader financial market stability in Vietnam,” he says.
Adds OCB CEO Nguyen Dinh Tung: “At this period of time, OCB aims to support SMEs because they are the backbone of Vietnam’s economy.”
About 20% of the working capital line for VPBank is expected to be allocated for women-owned SMEs, with blended finance funding provided by the Women Entrepreneurs Opportunity Facility (WEOF) – a first of its kind global finance facility dedicated to expanding access to capital for women entrepreneurs. WEOF was launched by IFC in 2014 through its Banking on Women programme and Goldman Sachs 10,000 Women.
IFC is providing US$8 billion in fast-track financing to support private-sector clients during the pandemic. The bulk of IFC’s financing is going to client banking institutions, enabling them to continue to offer trade financing, working capital support and medium-term financing to companies struggling with disruptions in supply chains, especially SMEs.
“Our support to VPBank and OCB will not only help the banks extend payment relief to clients, but will also enable them to offer new loans to SMEs, supporting continued operations and preserving jobs, thereby accelerating Vietnam’s economic recovery,” says IFC country manager for Vietnam, Cambodia and Lao People’s Democratic Republic Kyle Kelhofer.