Close to 2,000 exporters and importers in Vietnam have benefitted over the past fiscal year from trade financing from the International Finance Corporation (IFC) designed to help businesses withstand the impacts of Covid-19 and preserve jobs.
|Cargo handling at Saigon Port. Photo: Hung Thap|
Given the business disruptions caused by the pandemic and the consequent liquidity constraints, IFC has ramped up its trade finance and supply chain finance in the past 12 months to help local companies in Vietnam, especially garment and agribusiness suppliers, continue importing and exporting goods while protecting thousands of jobs.
In 2020, Vietnam’s resilience enabled the country to increase production and exports while businesses in most countries faced significant disruptions, helping it achieve a record-high trade surplus and maintain productive jobs.
IFC first expanded trade finance limits for Vietnamese banks to pre-empt potential trade finance challenges triggered by the first outbreak of the pandemic in February 2020. This year, IFC continued expanding trade finance operations in Vietnam to further support increased trade flows to help accelerate Covid-19 recovery.
IFC’s Global Trade Finance Program (GTFP) has boosted the capacity of six banks in Vietnam to cover payment risks in granting trade financing to local companies, mostly small and medium enterprises. With IFC’s support, the banks have issued 974 guarantees valued at US$686 million to support exporters and importers.
The six banks include An Binh Commercial Joint Stock Bank, Southeast Asia Commercial Joint Stock Bank, TienPhong Commercial Joint Stock Bank, Vietnam International Commercial Joint Stock Bank, Vietnam Joint Stock Commercial Bank for Industry and Trade, and Vietnam Prosperity Joint Stock Commercial Bank.
“The Covid-19 pandemic has impacted the capacity of banks to deliver trade finance solutions while limiting their customers’ access to them. IFC’s support has allowed VPBank to extend payment relief to more clients and provide new credit 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 Financial Institutions and Transaction Banking Center, Vietnam Prosperity Joint Stock Commercial Bank (VPBank).
IFC also provided $418 million to local suppliers, helping them maintain liquidity given payment term extensions required by buyers. This support came under the IFC Global Trade Supplier Finance program, which provides short-term financing to suppliers exporting to international buyers, 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 the receivables. This has helped us improve cash flow and ease the working capital pressure during the time of global trade disruptions,” said Ha Van Tien, Chief Finance Officer, Son Ha Garment JSC., a participant in IFC Global Trade Supplier Finance.
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, IFC increased its financing for Vietnamese garment and agribusiness suppliers by 28% in fiscal 2021, allowing 31 companies to sustain operations and securing more than 100,000 jobs.
“As in previous crises, IFC’s extensive global experience contributed to maintaining trade flows vital to business operations and to preserving jobs in Vietnam during the early stage of the Covid-19 pandemic. IFC will continue supporting businesses to shore up their working capital and increase trade activities as production cycles recover and economies rebuild after the crisis,” said Nathalie Louat, IFC Global Director of Trade and Supply Chain Finance.