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

Vietnam is cementing its status as one of the world’s most open economies, with exports playing a pivotal role in driving economic growth.

Recognizing the critical need to enhance the competitiveness of the country’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 an ambitious supply chain finance (SCF) program. Backed by a five million Swiss Francs grant from the State Secretariat for Economic Affairs (SECO) through 2029, the initiative aims to unlock up to $35 billion in working capital, benefiting over 500,000 Vietnamese SMEs.

Addressing Vietnam’s SME Financial Challenges

Vietnam’s economy is highly dependent on trade, with nearly 50% of the country’s gross domestic product (GDP) and every second job tied to the export sector. However, Vietnamese suppliers and exporters often face significant working capital constraints, as they typically receive payments 30 to 60 days after delivering goods. This delay hampers their ability to accept larger orders, expand production, and establish new business partnerships.

Despite SMEs’ crucial role in Vietnam’s economic landscape, fewer than 20% of local firms were linked to global value chains in 2023, according to a recent World Bank survey. This limited integration underscores the pressing need for enhanced financial solutions that can ease capital burdens and enable SMEs to compete more effectively in international markets.

How Supply Chain Finance Supports SMEs

Supply chain finance offers businesses quicker access to liquidity by converting sales receivables and inventories into cash. This financial tool helps firms reduce funding costs, streamline trade cycles, and strengthen their connections with global supply networks. By unlocking working capital, SMEs can invest in essential areas such as research and development, technology, workforce training, and business expansion.

H.E. Thomas Gass, Swiss Ambassador to Vietnam, highlighted 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 sought to address longstanding barriers to supply chain finance adoption. The first phase focused on three core areas:

• Establishing an enabling regulatory framework for SCF development.
• Enhancing the capacity of financial institutions to provide SCF solutions.
• Increasing market awareness and demand for SCF among SMEs.

Over the past five years, the program has achieved significant milestones, 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

Building on the successes of the first phase, the second phase of the SCF program, running through 2029, will focus on further strengthening Vietnam’s SCF ecosystem. Key priorities include:

Enhancing Legal and Regulatory Frameworks

The State Bank of Vietnam (SBV), IFC, and SECO will refine policies governing SCF.

Efforts will target digital finance regulations, e-financing platforms, and incentives for financial institutions to expand SCF offerings.

Strengthening Institutional Capacity Among Lenders

Banks and financial institutions will receive expert guidance on developing comprehensive SCF solutions.

Training programs will be implemented to enhance financial institutions’ ability to serve SME clients.

Promoting Awareness and Adoption of SCF Among SMEs

Educational initiatives will equip SMEs with the necessary 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 fostering a robust 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.”

Vietnam’s SME sector is a critical driver of the country’s economic growth and global trade participation. With continued support from international partners like IFC and SECO, the enhanced SCF program aims to remove financial bottlenecks, boost SME competitiveness, and further integrate Vietnam’s businesses into global value chains. This initiative represents a significant step toward a more inclusive and resilient economy, reinforcing Vietnam’s position as a key player in international trade.

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Source: Vietnam Insider