OCB plans to use an IFC loan to finance lending to smaller businesses and promote innovative finance to improve supply chain linkages in Vietnam.
|OCB will use the funds to increase lending to SMEs and women enterprises |
IFC, a member of the World Bank Group, will provide a loan of $100 million to Vietnam’s Orient Commercial Joint Stock Bank (OCB). The IFC-led financing package, combined with advisory services, will boost lending to small- and medium-sized enterprises (SMEs), especially women-owned or -led ones, and will promote supply chain financing in Vietnam.
Making up 98 per cent of Vietnam’s enterprises, SMEs are the primary engine of job creation in Vietnam, employing more than half of the labour force and contributing about 40 per cent to the gross domestic product. Yet around 60 per cent of SMEs have unmet financing needs – a $21 billion financing gap. Access to finance is therefore key to unlock the potential of SMEs.
The long-term financing package comprises of $57.16 million from IFC’s own account and $42.84 million from the multi-investor Managed Co-Lending Portfolio Programme (MCPP) managed by IFC.
Notably, OCB aims to use at least 50 per cent of the loan proceeds to finance Women SMEs, with support from the Women Entrepreneurs Finance Initiative (We-Fi). This project is the first investment IFC will make in a commercial bank under its partnership with We-Fi. We-Fi’s ambition to help expand financial and market access to women will be realized through a performance-based incentive that will help catalyze at least $50 million in loans to women entrepreneurs.
“OCB sees SMEs as an important target segment to realise its strategy to become a leading retail and SME bank in Vietnam. IFC’s financing package helps reinforce the bank’s continued commitment to expanding lending to this segment,” said Nguyen Dinh Tung, OCB chief executive officer.
In addition to funding, in partnership with the Swiss State Secretariat for Economic Affairs (SECO) and IFC, OCB will receive assistance with developing its supply chain finance (SCF) business.
IFC and OCB’s partnership started in 2011 with a trade finance guarantee of $20 million under IFC’s Global Trade Finance Programme. IFC provided additional financing with a $25 million loan in March 2012 and a revolving short-term loan of $10 million. This partnership allows the bank to increase financing to more SMEs and women-owned businesses and help more local companies increase trade and create employment opportunities.