Vietnam will receive US$5 million to nurture financial technologies (fintech) that can help address low financial inclusion in the country, especially among small and medium-sized enterprises (SMEs), according to a co-financing agreement signed between the Asian Development Bank (ADB) and Switzerland.

State Bank of Vietnam's headquarters is at 49 Ly Thai To, Hanoi. The bank will be supported in strengthening the regulatory framework for digital finance and building the government's capacity. File Photo

This funding, along with a $2 million contribution from the Japan Fund for Prosperous and Resilient Asia and the Pacific financed by the Government of Japan, will support technical assistance to expand inclusive and climate finance in the country.

Fintech has been central to the Vietnamese Government’s plans to expand financial services to consumers and (SMEs). The technical assistance will help the State Bank of Vietnam (SBV) to strengthen the regulatory framework for digital finance, build the capacity of government and other industry stakeholders, and assist financial institutions in developing digital banking.

ADB Director General for Southeast Asia Winfried Wicklein said financial institutions rely heavily on collateral-based credit decisions. “This disadvantages SMEs, which typically have little or no collateral. Banks also often centralize their credit processes, making it relatively more expensive to process smaller loans”.

“This technical assistance can help find solutions such as alternative credit scoring and introducing digital lending,” he added.

Almost 80 percent of Vietnam’s population is unbanked or underbanked. Microenterprises and SMEs are particularly affected, with their unmet financing need estimated at VND500 trillion (around US$21 billion). Women-owned and women-led SMEs (WSMEs) are even more adversely affected. Women entrepreneurs in Vietnam have an estimated $1.2 billion, but few banks have taken active measures to pursue this market opportunity.

The technical assistance will help advance women’s financing access, including providing training opportunities on fintech and green banking best practices to SBV staff, targeting 25% female participation, and consulting services to WSMEs on preparing green loan applications.

It will also help SBV refine its policies on green banking and communicate them to finance sector stakeholders. Green banking is poised to help Viet Nam achieve the $11 billion annual financing needed to reach net-zero carbon emissions by 2050.

According to the Head of Economic Cooperation and Development at the Swiss State Secretariat of Economic Affairs (SECO) and Switzerland’s Governor to ADB, Dominique Paravicini, by enhancing the regulatory environment for innovative fintech solutions and building capacities of market players in digital finance, Switzerland supports Vietnam in fostering the digital transformation of its financial sector.

“Ultimately, this will help SMEs in Vietnam to better access finance and expand their businesses,” Paravicini said.