Nearly 2,000 exporters and importers in Vietnam have benefitted from the trade financing of the International Finance Corporation (IFC) over the past fiscal year.
Given the business disruptions caused by the pandemic and the consequent liquidity constraints, the IFC has ramped up its trade and supply chain finance in the last 12 months to help local companies in Vietnam continue importing and exporting goods while protecting thousands of jobs, especially in the garment and agricultural business.
In 2020, Vietnam’s resilience enabled the country to increase production and exports while businesses in most countries faced significant disruptions, helping to achieve a record-high trade surplus and maintain jobs. The IFC first expanded its trade limits for Vietnamese banks to pre-empt potential trade finance challenges triggered by the pandemic. In 2021, IFC continued expanding trade finance operations in Vietnam to further support increased trade flows and help accelerate economic recovery.
IFC’s Global Trade Finance Program has boosted the capacity of six banks in Vietnam to cover payment risks in granting financing to local companies, mostly small- and medium-sized enterprises (SME). With IFC’s support, the banks have issued 974 guarantees valued at $686 million to support importers and exporters.
“The pandemic has impacted the capacity of banks to deliver finance solutions while limiting their customers’ access to them. However, IFC’s support has allowed VPBank, for instance, to extend payment relief to more clients and provide new credits to SMEs that have been affected by the pandemic. This helped facilitate a smooth flow of goods across borders, easing the liquidity constraints,” said Vo Hang Phuong, director of the Financial Institutions and Transaction Banking Center at VPBank.
The IFC also provided $418 million to local suppliers, helping them maintain the liquidity required by buyers. This support came under the IFC’s Global Trade Supplier Finance (GTSF) programme, which provides short-term financing to exporters by discounting invoices once they are approved by the buyer.
“IFC’s facility enables suppliers to convert sales receivables to immediate cash as soon as buyers approve these. This has helped us improve cash flow and ease the working capital pressure during the time of global trade disruptions,” said Ha Van Tien, CFO at Son Ha Garment JSC., a participant in the IFC’s GTSF.
Demand for supply chain finance surged during the pandemic due to the liquidity gap faced by suppliers as a result of disrupted supply chains. In response, the IFC increased its financing by 28 per cent in 2021 for Vietnamese businesses – particularly in textiles and garments and agriculture – allowing 31 companies to sustain operations and securing more than 100,000 jobs.