Vietnam has been in short of supply chain finance solutions, which help local firm expand their business and penetrate into new markets, heard a conference in Ho Chi Minh City on November 11.

Experts said that Vietnam has recorded robust export growth in recent years, with free trade agreements opening up new market opportunities for local firms. However, a lack of working capital and transaction banking services like supply chain financing partially affect local suppliers’ ability to accept large orders or develop new relationships with their partners in the value chain.

Without supply chain finance solutions, it would be difficult for both suppliers and distributors to optimise their capital management by converting their sales receivables and inventories into cash and accessing to lower-cost credit, they said at the fourth annual conference on supply chain financing in Asia-Pacific by the State Bank of Vietnam (SBV) in collaboration with the APEC Business Advisory Council and the International Finance Corporation (IFC).

According to statistics from the National Registration Agency for Secured Transactions, the number of registrations for transactions in accounts receivable and inventory financing only accounts for 30 percent, which is much lower than the figures in more developed markets.

Ha Thu Giang, deputy head of the Credit Policies for Economic Sectors Department under the SBV, described supply chain financing as an effective solution that help members of the value chain improve competitive edge and gain optimal benefits, while creating favourable conditions for financial institution to control capital flow.

Therefore, supply chain financing would be a development trend of the banking system in the time ahead, she added.

However, Giang pointed out major difficulties to develop the service in Vietnam, such as lack of transparency in corporate financial information, limited capacity of local suppliers, and the absence of a comprehensive customer database and e-commerce platforms providing supply chain financing.

Meanwhile, IFC Country Manager for Vietnam, Cambodia and Laos Kyle Kelhofer said the availability of supply chain finance products will help local firms promote linkages with global chain.
However, few financial institutions in Vietnam offer modern supply chain finance services at large scale, which is a missed opportunities for both financial service providers and local businesses, he added.

With the support from the Swiss State Secretariat for Economic Affairs (SECO), IFC is implementing an advisory project to put forth supply chain financing for micro, small and medium-sized businesses through improving legal frameworks, sector infrastructure, capacities of service providers and awareness of local firms.

IFC pledged support for Vietnamese players to develop and diversify supply chain finance market, he stressed.