The International Finance Corporation (IFC), a member of the World Bank Group, has increased trade finance limits for Vietnamese banks as a rapid response initiative to address, in advance, potential trade finance challenges triggered by the outbreak of the novel coronavirus, known as Covid-19.
The spread of Covid-19 has caused business disruptions in Vietnam since the first case was announced in late January. Apart from a fall in tourism and associated services, the epidemic has affected cross-border trade impacting manufacturing, agribusiness and other sectors.
In response, IFC is supporting Vietnamese businesses by increasing trade limits for four client commercial banks including An Binh Commercial Joint Stock Bank, TienPhong Commercial Joint Stock Bank, Vietnam International Commercial Joint Stock Bank (VIB), and Vietnam Prosperity Joint Stock Commercial Bank. The increased total limit of US$294 million will enable these banks to improve their capacity to cover payment risk in granting trade financing to local companies, mostly small and medium enterprises.
This initiative complements the State Bank of Vietnam, the country’s central bank, (SBV)’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.
“IFC’s initiative, an effective response to help ensure resiliency, shows our confidence in our local partner banks as well as our commitment to strengthen Vietnam’s economy,” said Kyle Kelhofer, IFC Country Manager for Vietnam, Cambodia and Lao PDR.
Following this fast-to-implement and flexible trade finance instrument, IFC is 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.