Additional 40 million USD for Vietnamese bank to aid SMEs amid COVID-19 hinh anh 1Representatives of IFC and OCB at the signing of the loan agreement (Photo: Vietnam Plus)

Hanoi (VNA) – The International Finance Corporation (IFC) – a member of the World Bank Group – has signed an agreement to provide another 40 million USD for the Orient Commercial Bank (OCB) to help it with the support of COVID-hit clients, especially small- and medium-sized enterprises.

The one-year renewable senior loan offers OCB additional liquidity to continue lending to businesses as the bank is offering payment relief to its borrowers at the same time.

OCB will prioritise clients working in sectors facing direct impact of COVID-19 like tourism and production as well as those related to disease response activities.

Nguyen Dinh Tung, CEO of OCB, said COVID-19 impacts are projected to continue for a long period of time, thus difficulties facing the business community, particularly small- and medium-sized enterprises

(SMEs), remain tremendous. 

He stated to provide the maximum support for SMEs, the bank is reviewing and adjusting its credit programmes to make them more suitable to the current situation while continuing the implementation of preferential policies for firms to access capital and restore operations, thus helping with the recovery of the national economy.

“Our experience from past shocks, including the global financial crisis 2008, has taught us that micro, small and medium enterprises are especially impacted by the current crisis. Keeping them solvent is therefore key to saving jobs and limiting the economic damage,” said Kyle Kelhofer, IFC Country Manager for Vietnam, Cambodia and Laos.

He noted the IFC’s support to OCB will not only help the bank extend payment relief to clients but also enable it to offer new loans to SMEs, supporting continued operations and preserving jobs, thereby accelerating Vietnam’s economic recovery.

The loan was part of the IFC’s COVID-19 fast-track financing support package worth 8 billion USD to support private-sector clients during the COVID-19 crisis. 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.

Another Vietnamese beneficiary of the package is the Vietnam Prosperity Joint Stock Commercial Bank (VPBank), which receives 100 million USD in one-year, renewable senior loans.

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 local businesses impacted by the pandemic. AIIB will be co-financing up to 100 million USD to support VPBank’s trade finance and working capital finance to Vietnamese enterprises, including SMEs, during the pandemic.

“Small and medium enterprises are a strategic client segment to VPBank and we have continuously offered various solutions to their needs given the ongoing 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,” said VPBank CEO Nguyen Duc Vinh.

The pandemic has severely plagued Vietnamese businesses including SMEs, a key driver of the nation’s economic growth over the past two decades. The most serious impact of COVID-19 on firms is the lack of cash flows, which directly hits their survival. A recent survey by the Vietnam Chamber of Commerce and Industry (VCCI) showed that 85 percent of businesses have their markets narrowed, forcing 60 percent of them to face cash flow problems. This has pushed them to the brink of bankruptcy, where the ability to continue is being counted by mere months. The results are similar to the global research report of the Association of Chartered Certified Accountants (ACCA). In Vietnam, 47 percent of enterprises faced difficulties in cash flow due to consumers buying less.

Guided by the State Bank of Vietnam, VPBank and OCB have taken various relief measures for their SME clients impacted by COVID-19./.

 IFC, the largest global development institution focusing on the private sector in emerging markets, works in more than 100 countries. In fiscal year 2019, the corporation invested more than 19 billion USD in private companies and financial institutions across developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity