The Asian Development Bank (ADB) and Switzerland signed a co-financing agreement of up to $5 million on May 4 to nurture financial technologies (fintech) that can help address low financial inclusion in Vietnam, especially among small and medium-sized enterprises (SMEs).

The funding, along with a $2 million contribution from the Japan Fund for a Prosperous and Resilient Asia and the Pacific, financed by the Japanese Government, will support technical assistance (TA) that aims to expand inclusive and climate finance in the country.

Fintech has been central to the government’s plans to expand financial services to consumers and SMEs. The TA will help the State Bank of Vietnam (SBV) strengthen the regulatory framework for digital finance, build capacity in the government and other industry stakeholders, and help financial institutions with developing digital banking.

“Financial institutions rely heavily on collateral-based credit decisions,” said ADB Director General for Southeast Asia Winfried Wicklein. “This disadvantages SMEs, which typically have little or no collateral. Banks also often centralize their credit processes, making it relatively more expensive to process smaller loans. This TA can help find solutions such as alternative credit scoring and introducing digital lending.”

Almost 80 per cent of Vietnam’s population are unbanked or underbanked. Micro-enterprises and SMEs are particularly affected, with their unmet financing needs estimated at VND500 trillion (around $21 billion). Women-owned and women-led SMEs (WSMEs) are even more adversely affected. Women entrepreneurs in Vietnam represent an estimated $1.2 billion, but few banks have taken active measures to pursue this market opportunity.

The TA will help advance women’s financing access, including through the provision of training opportunities in fintech and green banking best practices to SBV staff, targeting 25 per cent female participation, as well as consulting services to WSMEs on preparing green loan applications.

It will also help the SBV refine its policies on green banking and communicate them to finance sector stakeholders. Green banking is poised to help Vietnam achieve the $11 billion annual financing needed to reach net-zero carbon emissions by 2050.

“By enhancing the regulatory environment for innovative fintech solutions and building the capacities of market players in digital finance, Switzerland supports Vietnam in fostering the digital transformation of its financial sector,” said Head of Economic Cooperation and Development at the Swiss State Secretariat of Economic Affairs (SECO) and Switzerland’s Governor to ADB, Dominique Paravicini. “Ultimately, this will help SMEs in Vietnam better access finance and expand their businesses.”