VPBank archives

Viet Nam: VPBank’s Journey with Small and Medium-Sized Enterprises during COVID-19

Vietnam Prosperity Joint Stock Commercial Bank’s (VPBank) small and medium-sized enterprise (SME) loan portfolio was increasing. When the pandemic spread, VPBank needed to strengthen its own liquidity to help small businesses stay afloat. The Asian Infrastructure Investment Bank (AIIB) acted quickly, having established the financing facility to do so right after COVID-19 started spreading.
Viet Nam
VP Bank archives
Viet Nam
VP Bank archives
Viet Nam
VP Bank archives
Viet Nam
VP Bank archives
Viet Nam is the world’s second-largest coffee producer, exporting about 90 percent of its coffee to more than 90 countries, accounting for about 20 percent of global supply. Coffee exports translate to more than USD2.5 billion in annual revenue, accounting for about 10 percent of the country’s agricultural exports.

Most of the coffee in Viet Nam is produced by private SMEs. Like many businesses relying on global supply chains, coffee producers were severely impacted by COVID-19. SMEs in different fields had to suspend operations. Others were dissolved, went bankrupt or scaled down because of poor cash flow. About 70 percent of workers suffered income reduction and nearly 40 percent experienced reduced working hours or worked on alternate schedules. Many jobs were lost.

It was apparent that, to overcome the impact of COVID-19, businesses needed immediate liquidity support to maintain production and pay salaries.

Thus began AIIB’s partnership with VPBank. A USD100-million loan from AIIB’s COVID-19 Crisis Recovery Facility was quickly arranged to bolster VPBank’s working capital and further develop trade-related programs lending to local enterprises. The Viet Nam: VP Bank COVID-19 Response Facility project became AIIB’s first investment in Viet Nam, an AIIB founding member, as well as the first lending to a financial institution in South East Asia.

“AIIB worked with VP Bank to understand the support that SMEs needed to help their businesess survive at a time of crisis. The most efficient way for us, as banks, was to provide them with access to finance so that they can continue serving their customers, as well as support their employees, their families and their communities," said AIIB Principal Investment Officer Pramod Vijayasankar.

Initial discussions between AIIB and VPBank commenced in April 2020. The project was approved in mid-July 2020. By mid-November 2020, VPBank had received the first loan disbursement.

“AIIB has deep understanding of the client’s needs during this global crisis,” said Vo Hang Phuong, director of financial institutions and transaction banking at VPBank. “COVID-19 brings great difficulties and challenges to businesses and the development of Viet Nam's economy. This loan demonstrated AIIB’s prompt assistance to entities facing difficulties. VPBank is pleased to be the first Vietnamese organization to cooperate with AIIB.”

With AIIB’s timely and rapid disbursement of the VPBank COVID-19 liquidity loan, VPBank was able to help its corporate clients maintain business operations and supplement their working capital. VPBank can widen its program for supply chain financing for coffee exporters, which, in turn, could help save coffee farmers’ livelihoods and help coffee-producing SMEs keep running until global demand picks up anew.

“We are gradually implementing customer support programs, especially the supply chain financing program,” said Phuong. “We will accompany our clients through this difficult time.”

The project, however, was not free from challenges, said Phuong. To promptly respond to the liquidity needs of VPBank’s clients, the project needed to be agile, with professional and often comprehensive due diligence requirements, following international standards. VPBank exerted great effort to meet committed timelines and satisfy AIIB’s legal, compliance and commercial requirements. During COVID-19, AIIB and VPBank improvised, using technology to quickly implement the project.

“Onsite due diligence was not possible for the project team,” said Phuong. “Due diligence was conducted virtually through videoconferences and phone calls between AIIB and VPBank departments. We hope to explore more opportunities for cooperation with AIIB, an important partner of VPBank,” Phuong continued. “I hope we will have opportunities to cooperate more and contribute to the recovery and development of the economy.”

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