Overview of the conference. Experts said local producers and suppliers urgently need efficient financing to support their trade cycles with global partners. — Photo courtesy of IFC
HCM CITY — When trade grows, promoting supply chain financing will help improve the competitiveness of micro, small and medium enterprises (MSEME) in Việt Nam, enabling them to join global supply chains, experts said at the fourth annual conference on supply chain financing in Asia-Pacific in HCM City on Monday.
Việt Nam’s foreign trade volume has increased in recent years, with free trade agreements opening up new market opportunities for local businesses.
However, lack of working capital and transaction banking services such as supply chain finance (SCF) partially hinders producers and suppliers from accepting large orders or developing new relationships with their value chain actors.
Without SCF solutions, suppliers and distributors are not able to optimise their working capital management by converting their sales receivables and inventories to cash and obtain lower-cost financing.
“Local producers and suppliers urgently need efficient financing to support their trade cycles with global partners,” said Julius Caesar Parrenas, Coordinator of the Asia-Pacific Financial Forum under ABAC.
Financial services are one of the critical elements for improving the competitiveness of supply chains in Việt Nam. Not only do SCF services enable suppliers and distributors to increase their working capital, but they will also allow them to conduct more open-account transactions, making them more attractive to global buyers, Parrenas said.
According to the National Secured Transactions Registration System, the share of receivables and inventory interests registered in the total number of security interest registrations in Việt Nam is just about 30 per cent, significantly lower than those in more developed markets.
Hà Thu Giang, deputy director of the Credit Policies for Economic Sectors Department, State Bank of Việt Nam, said financing producers and suppliers would be a development trend of banking activities in Việt Nam in the near future.
However, she also mentioned difficulties such as lack of transparency in corporate financial information, limited capacity of local suppliers, as well as the absence of a comprehensive customer database and e-commerce platforms providing supply chain financing.
“In an export-oriented economy like Việt Nam, availability of SCF products will help local producers and exporters enhance their linkages to global supply chains,” said Kyle Kelhofer, IFC Country Manager for Viet Nam, Cambodia and Lao PDR
“However, few financial institutions in Việt Nam offer modern SCF services on a significant scale, which is a missed opportunity both for the financial services providers and the businesses.”
IFC, in partnership with the Swiss State Secretariat for Economic Affairs (SECO), is implementing a multi-year advisory programme to facilitate supply chain financing for Vietnamese MSMEs by improving the regulatory framework, sector infrastructure, capacities of SCF providers, and awareness of MSME suppliers.
The event was jointly organised by the APEC Business Advisory Council (ABAC), the State Bank of Việt Nam and International Finance Corporation (IFC). — VNS
