ADB, Switzerland grant 5 mln USD to support Vietnam improve fintech

Women entrepreneurs in Viet Nam have an estimated 1.2 billion USD, but few banks have taken active measures to pursue this market opportunity. (Photo: ADB)

Hanoi - The Asian Development Bank (ADB) and Switzerland have signed a cofinancing agreement of up to 5 million USD to develop financial technologies (fintech) that can help address low financial inclusion in Vietnam, particularly among small and medium-sized enterprises (SMEs).

This funding, along with a 2 million USD 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) project that aims to expand inclusive and climate finance in the country.

Fintech has been at the center of the Vietnamese government’s plans to expand financial services to consumers and SMEs. The TA will help the State Bank of Vietnam (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.

ADB Director General for Southeast Asia Winfried Wicklein said 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. This TA can help find solutions such as alternative credit scoring and introducing digital lending.

Almost 80% of Vietnam’s population is unbanked or underbanked. Microenterprises and SMEs are particularly affected, with their unmet financing need estimated at 500 trillion VND (around 21 billion USD). Women-owned and women-led SMEs (WSMEs) are even more adversely affected. Women entrepreneurs in Vietnam have an estimated 1.2 billion USD, 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 Vietnam achieve the 11 billion USD annual financing needed to reach net-zero carbon emissions by 2050.

Head of Economic Cooperation and Development at the Swiss State Secretariat of Economic Affairs (SECO) and Switzerland’s Governor to ADB Dominique Paravicini said by enhancing the regulatory environment for innovative fintech solutions and building capacities of market players in digital finance, Switzerland supports Vietnam in fostering the digital transformation of its financial sector. Ultimately, this will help SMEs in Vietnam to better access finance and expand their businesses.

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Fintech enterprises deploying innovative e-wallet initiatives to capture fair share A wide variety of innovative payment systems are expected to assist Vietnam in moving closer to its objective of achieving financial inclusion and a cashless society in the not-too-distant future. However, there will be fierce competition.