Vietnam’s SMEs to Benefit from $35 Billion Supply Chain Finance Initiative Backed by IFC, Switzerland, and Local Partners

Vietnam has positioned itself as one of the most open economies globally, with exports playing a crucial role in economic development.

To enhance the competitiveness of Vietnam’s small and medium enterprises (SMEs), the International Finance Corporation (IFC), the Embassy of Switzerland, local authorities, and business stakeholders have launched the second phase of their ambitious supply chain finance (SCF) program. This initiative, backed by a five million Swiss Francs grant from the State Secretariat for Economic Affairs (SECO) until 2029, is expected to unlock up to $35 billion in working capital, benefiting over half a million Vietnamese SMEs.

Addressing Vietnam’s SME Financial Challenges

Vietnam has positioned itself as one of the most open economies globally, with exports playing a crucial role in economic development. Nearly 50% of the country’s gross domestic product (GDP) and every second job are tied to the export sector. However, many Vietnamese suppliers and exporters struggle with working capital constraints. Most receive payments 30 to 60 days after delivering goods, limiting their ability to take on larger orders, expand operations, and form new business partnerships.

Despite their pivotal role in trade and economic development, fewer than 20% of local firms were linked to global value chains in 2023, according to a recent World Bank survey. This limited integration highlights a pressing need for improved financial solutions that can ease capital burdens and enable SMEs to thrive in an increasingly competitive global market.

How Supply Chain Finance Supports SMEs

Supply chain finance provides businesses with faster access to liquidity by converting sales receivables and inventories into cash. This approach helps firms reduce funding costs, streamline trade cycles, and strengthen their connections to international supply networks. Additionally, by unlocking working capital, SMEs can invest in research and development, technology, workforce skills, and other growth-enabling initiatives.

H.E. Thomas Gass, Swiss Ambassador to Vietnam, emphasized the program’s transformative impact:

“We estimate that the first phase of the program has unlocked over $30 billion in capital for around half a million Vietnamese SMEs. By providing financial support to these businesses, the program not only helped SMEs to thrive but also contributed to the growth of the broader economy, fostering a more inclusive and sustainable marketplace.”

Achievements from the First Phase (2018-2023)

Launched in 2018 with SECO’s support, the IFC’s Vietnam SCF Program aimed to address longstanding market barriers that hinder SCF growth. The first phase focused on three key areas:

• Creating an enabling regulatory environment for SCF development.
• Enhancing institutional readiness among financial service providers.
• Boosting market demand and awareness of SCF solutions.

Over the past five years, the program has made significant progress, including:

• Facilitating regulatory improvements in movable asset financing.
• Providing tailored SCF strategy consultations to four leading banks in Vietnam.
• Enabling up to $33 billion in receivables and inventory financing for 500,000 SMEs.

Next Steps: Strengthening Vietnam’s SCF Market

The second phase of the SCF program, which will run through 2029, aims to build on these successes. With IFC and SECO’s continued collaboration, efforts will focus on:

1. Improving Legal and Regulatory Frameworks:

   • The State Bank of Vietnam (SBV), IFC, and SECO will refine policies governing SCF.
   • Key areas include digital finance regulations, e-financing platforms, and incentives for financial institutions to expand SCF offerings.

2. Enhancing Institutional Capacity Among Lenders:

   • Banks and financial institutions will receive expert guidance on providing comprehensive SCF solutions.
   • Training and development programs will help them better serve SME clients.

3. Increasing Awareness and Adoption of SCF Among SMEs:

   • Education initiatives will equip SMEs with the knowledge to leverage SCF effectively.
   • Special emphasis will be placed on integrating local suppliers into global value chains.

Deputy Governor of the State Bank of Vietnam, Nguyen Ngoc Canh, reaffirmed the government’s commitment to creating a more supportive SCF ecosystem:

“The State Bank of Vietnam, in collaboration with IFC and SECO, will continue to review and adjust regulations to foster a more favorable environment for SCF. This includes refining rules for e-financing platform lending and incentivizing financial institutions to diversify their offerings, ultimately improving credit access for SMEs.”

A Key Driver for Vietnam’s Economic Future

As Vietnam seeks to become a high-income economy by 2045, trade will remain a vital growth engine. Strengthening SCF mechanisms will be instrumental in accelerating this journey, ensuring that SMEs—accounting for nearly 98% of all businesses in the country—have the resources to expand their operations and compete on a global scale.

Thomas Jacobs, IFC Country Manager for Vietnam, Cambodia, and Lao PDR, emphasized the broader implications of SCF development:

“Trade is a key driver of Vietnam’s economy, and it’s going to be central to the country’s ambition to reach high-income status by 2045. IFC is very pleased to be working with SECO and our bank partners to help stimulate the market for supply chain finance, which is going to be a critical part of the financial ecosystem for SMEs.”

With strong partnerships between the government, financial institutions, and international stakeholders, Vietnam’s SCF program is poised to unlock unprecedented opportunities for SMEs, catalyzing economic growth, innovation, and global trade participation over the next five years.