The financial arm of the World Bank Group, IFC, is providing a syndicated loan of $100 million to Vietnam’s TPBank to help it further extend long-term funding to micro-, small-, and medium-sized enterprises (MSMEs) and individual borrowers through digital delivery channels.
Lack of financial access is one of the key challenges for MSMEs, which employ about 77 per cent of Vietnam’s labour force and contribute to around 41 per cent of the country’s gross domestic product (GDP). About 70 per cent of MSMEs have unmet financing needs, resulting in a $23.6 billion financing gap, equivalent to 12 per cent of the GDP.
Given the scenario, IFC’s long-term funding commitment would enable TPBank to double its MSME portfolio over the next five years, providing more than $1.8 billion through about 46,000 loans by 2022. Notably, up to 65 per cent of the transactions will be made digitally.
|TPBank obtains $100 million loan from IFC to spend on digital financial services|
Shifting to a cashless system is a priority for the government to increase efficiency, promote business and economic development, and reduce poverty in remote rural areas which are difficult to reach through traditional financial providers.
The five-year financing package—comprising of $60 million from IFC’s own account, $22.5 million from multi-investor Managed Co-Lending Portfolio Programme (MCPP) managed by IFC and $17.5 million from Industrial and Commercial Bank of China Ltd.’s Hong Kong Branch under IFC’s B Loan Programme—is likely to improve the Vietnamese banking sector’s competitiveness by promoting a cashless economy via innovation and competition. It is further expected to create and facilitate between 35,000 and 56,000 jobs over the next five years.
“The much-needed syndicated funding from IFC and international lenders will help TPBank to implement a long-term digital strategy to capture digital demographic growth opportunities and increase its reach to the unbanked and underserved segments,” said TPBank CEO Nguyen Hung.
“This syndicated facility is expected to have a catalytic impact on the Vietnamese banking sector, which is at a key juncture of mobilising long-term private funding needed to support the country’s key development goals of developing SMEs and creating jobs,” said Kyle Kelhofer, IFC Country Manager for Vietnam, Cambodia, and Lao PDR. “The large mobilisation component sends strong signals to the market, creating a demonstration effect of private sector financing for this key sector.”
IFC and TPBank’s partnership started in early 2016 with a trade finance guarantee of $10 million under IFC’s Global Trade Finance Programme (GTFP). The trade finance line has been expanded over the years with the current limit of $60 million, allowing the bank to help more local companies increase trade, generate foreign exchange, and create employment opportunities.
IFC currently owns 4.387 per cent of the bank"s equity capital after its quasi-equity investment in May 2016 was converted into equity. In addition to financing, IFC has been helping the bank to strengthen its corporate governance and connecting it with a network of innovative financial service providers in the region.
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