IFC raises trade finance limits to support firms amid COVID-19 hinh anh 1Tourists in Da Nang city. Tourism and associated services are among the hardest hit sectors by the COVID-19 epidemic (Photo: VNA)

Hanoi (VNA) - The International Finance Corporation (IFC) announced it has increased trade finance limits for Vietnamese banks to improve their capacity to cover payment risks in granting trade financing to local companies affected by the outbreak of the novel coronavirus (COVID-19).

The spread of COVID-19 has caused business disruption in Vietnam since the first case was announced in late January. The hardest hit areas include tourism and associated services, cross-border trade, manufacturing and agribusiness, among other sectors.

IFC is supporting Vietnamese businesses by increasing trade limits for four client commercial banks including An Binh Commercial Joint Stock Bank (ABBank), Tien Phong Commercial Joint Stock Bank (TPBank), Vietnam International Commercial Joint Stock Bank (VIB) and Vietnam Prosperity Joint Stock Commercial Bank (VPB).

The increased total limit of 294 million USD will enable these banks’ capacity to cover payment risks in granting trade financing to local companies, mostly small and medium enterprises, IFC said in its press release on February 21.

“VIB welcomes this timely and meaningful initiative to cope with possible liquidity constraints and de-risking trends during this challenging period,” said VIB’s Chief Executive Officer Han Ngoc Vu.

“IFC’s guarantee will help local banks significantly extend trade finance to more importers and exporters, some of which are credit-constrained and rely on bank trade facilities to manage cash flows and purchase raw inputs.”

This initiative follows the State Bank of Vietnam’s call to financial institutions to support local businesses, which may be affected by the coronavirus outbreak – particularly those in trade and supply chain linkages.

“Leveraging IFC’s global experience in responding to several economic crises in the past, the decision to increase trade limits is an effort to ensure continued trade flows during this challenging phase. The expanded trade finance line will help mitigate trade finance risks, thus softening the impact of COVID-19 on the Vietnamese economy and the private sector,” said Mehmet Mumcuoglu, IFC Financial Institutions Group Manager for East Asia and the Pacific.

Following this initiative, IFC is also exploring other expanded interventions to extend its support to Vietnam to mitigate the economic impact of COVID-19 and help the nation sustain robust economic growth, said Kyle Kelhofer, IFC Country Manager for Vietnam, Cambodia and Laos./.