Vietnam’s SMEs Get a Boost from Digital Lendingby Johanan Devanesan February 2, 2023
Even as much of the world experienced recessionary economic winds, the Vietnamese economy continued to be robust, even recording growth out of a dour 2022. Part of that resurgence in Vietnam was a strong import-export boom, and now positive digital trends are lending a helping hand to the country’s small and medium-sized enterprises (SMEs) to boost their abilities to sustain growth.
Encouraging economic outlook for Vietnam trade
The turnover of import-export goods in Vietnam reached US$616 billion for the first 10 months of 2022, up 14% over the same period the previous year. The export value alone recorded in that time frame was US$312 billion, a 15.9% increase year-on-year.
The majority of this growth was driven by Vietnam’s base in commodities and manufacturing, and the country is swiftly positioning itself to be an integral link in the global supply chain, as traditional heavyweight faces China trade restrictions and the lingering effects of a prolonged and economically damaging nationwide COVID-19 lockdown.
Like most of Southeast Asia, SMEs play a vital role in the local economy of Vietnam, accounting for well over 90% of all businesses here. Vietnam’s capabilities in non-agricultural industry, textile,. manufacturing, construction, services, along with wholesale and retail trade will be important in the country’s push to become a bigger part of global supply lines.
Digital lending aid for SMEs in Vietnam
Vietnamese SMEs have long been adept at figuring out nimble and cost-effective workarounds, but in order to achieve that upper echelon of production capacities and compete with global multinationals, adequate funding and resources would be necessitated.
“Business R&D spending in SMEs is limited but, based on survey data, local SMEs appear to be quite innovative, especially in product and process innovation,” states the Organisation for Economic Co-operation and Development (OECD) in its study of SME and Entrepreneurship Policy in Viet Nam. “An assumption is, therefore, made that this innovation is mostly of a frugal nature.”
Now welcome aid is coming for the thousands of SMEs registered in Vietnam in the form of digital lending support. Fintech firms are establishing connections with commercial banks in the country to lend unsecured loans to individuals as well as to SMEs.
Interest in both consumer and business loans is steadily increasing, as is the number of digital lending fintechs, both local and international, that are springing up in Vietnam. Validus Vietnam is the local subsidiary of Validus Capital based out of Singapore, and has been working with conglomerate TTC Group and early-stage VC Do Ventures to expand its Vietnam operations, promoting digital lending to SMEs here across the retail, food, healthcare, garment, pharmaceutical and logistics sectors.
FI-fintech partnerships easing digital lending disbursements across Vietnam
With its partners, Validus introduced a capital support solution for businesses operating as part of the international goods supply chain. The eBIZ super-fast loan platform approves borrowers for unsecured loans up to 500 million VND (approximately US$21,322) in value within a 48-hour period, on a loan repayment term of 12 months.
Validus has thus far disbursed over US$1 billion in this manner to SMEs operating out of Vietnam, Singapore, Indonesia, and Thailand. The group is also collaborating with TTC Group and the Vietnam Young Entrepreneurs Association to develop a digital lending scheme for the 9,000 members of the Association to access micro loans.
Fintechs are working with other institutions in a number of differing ways to offer credit facilities for Vietnamese businesses. Singapore-based Funding Societies is using a US$22.5 million investment from gaming and payments platform provider VNG Corporation to develop a more physical system comprising 150,000 agents and retail locations, with the aim of disbursing US$2 billion worth of unsecured loans to prospective SMEs.
Japan’s Sumitomo Mitsui Banking Corporation (SMBC) poured 1.3 billion yen (approximately US$10 million) into SmartNet JSC to develop the SmartPay app intended for micro and small enterprises, while also developing buy-now and post-paid solutions for around 667,000 retailers across 63 provinces and cities.
Meanwhile Indonesian fintech Kredivo collaborated with local FI VietCredit and e-commerce platform Sendo to introduce buy now-pay later services for both consumers and micro, small businesses.
These international partnerships solidified digital lending capabilities that could empower SMEs in Vietnam to access better financial resources, improve production capacities, and embark on digital transformation drives. These could in turn help SMEs ride the shift that Vietnam is undergoing, from exporting raw materials to pursuing opportunities in the global marketplace for processed products with higher added value, and strengthen the country’s participation in lucrative worldwide supply chains.
Alongside the invaluable opportunity for local businesses to join and expand export markets, the demand for local consumption is also slated to increase if the economy remains robust. As Vietnamese consumers seek better spending potential, numerous local fintech companies are also establishing relationships with local banks and financial institutions to offer digital lending products for end-users.