Today, Viet Nam is one of the most open economies in the world with about half of the country’s gross domestic product and every second job, directly or indirectly depending on exports. However, Vietnamese suppliers and exporters face working capital constraints, as they typically only receive payment within 30 to 60 days after delivering goods, preventing them from accepting larger orders and developing new business relationships. Less than one fifth of local firms have global value chains linkages in 2023, according to a recent World Bank survey.
Better access to SCF can mitigate working capital constraints by converting sales receivables and inventories to cash and allowing firms to lower their funding costs. In turn, this accelerates trade cycles and strengthens local linkages to global value chains. It also helps release capital for other productive purposes, such as investing in research and development, technology and new skills.
“We estimate that the first phase of the program has unlocked over $30 billion in capital for around half a Vietnamese SMEs,” said H.E. Thomas Gass, Swiss Ambassador to Viet Nam. “By providing financial support to these businesses, the program not only helped SMEs to thrive but also contributed to the growth of the broader economy, fostering a more inclusive and sustainable marketplace.”
Launched in 2018 with SECO support, IFC’s Viet Nam SCF Program aims to address persistent market barriers that impeded SCF growth, focusing on three key components: fostering an enabling environment for SCF, enhancing institutional readiness, and stimulating market demand and awareness. Over the past five years, the program has contributed to improved movables finance regulations, provided tailored SCF strategy advice to four banks, and facilitated up to $33 billion in receivables and inventory financing for 500,000 SMEs.
“The State Bank of Viet Nam, in collaboration with IFC and SECO, will continue to review and adjust regulations to foster a more favorable environment for SCF. This includes refining rules for e-financing platform lending and incentivizing financial institutions to diversify their offerings, ultimately improving credit access for SMEs," said Deputy Governor Nguyen Ngoc Canh.
During the second phase, spanning the next five years, IFC and SECO will focus on supporting a more robust legal and regulatory framework to strengthen the SCF market in Viet Nam. The partnership will also enhance the institutional capacity of lenders, enabling them to provide comprehensive SCF solutions to local SMEs. Furthermore, a key priority will be to advance the SCF knowledge and capacity of both buyers and local suppliers, thereby fostering increased uptake of supply chain finance in the country.
“Trade is a key driver of Viet Nam’s economy, and it’s going to be central to the country’s ambition to reach high-income status by 2045. IFC is very pleased to be working with SECO and our bank partners to help stimulate the market for supply chain finance, which is going to be a critical part of the financial ecosystem for SMEs,” said Thomas Jacobs, IFC Country Manager for Viet Nam, Cambodia and Lao PDR.
About IFC
IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2024, IFC committed a record $56 billion to private companies and financial institutions in developing countries, leveraging private sector solutions and mobilizing private capital to create a world free of poverty on a livable planet. For more information, visit www.ifc.org.
