Report and Recommendation of the President to the Board of Directors
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Report and Recommendation of the President to the Board of Directors Project Number: 53427-001 February 2021 Proposed Loan and Administration of Technical Assistance Grant Vietnam International Commercial Joint Stock Bank Vietnam International Bank Supporting Small and Medium-Sized Enterprises and Improving Living Conditions Project (Viet Nam) This is a redacted version of the document approved by ADB’s Board of Directors, which excludes information that is subject to exceptions to disclosure set forth in ADB's Access to Information Policy.
CURRENCY EQUIVALENTS
(as of 18 February 2021)
Currency unit – dong (D)
D1.00 = $0.000043
$1.00 = D23,015
ABBREVIATIONS
ADB – Asian Development Bank
ASEAN – Association of Southeast Asian Nations
CAR – capital adequacy ratio
CBA – Commonwealth Bank of Australia
CEO – chief executive officer
COVID-19 – coronavirus disease
ESMS – environmental and social management systems
GDP – gross domestic product
LLR – loan loss reserve
NPL – nonperforming loan
SBV – State Bank of Viet Nam
SMEs – small and medium-sized enterprises
TA – technical assistance
VIB – Vietnam International Commercial Joint Stock Bank
WSMEs – women-owned and women-led SMEs
NOTES
(i) The fiscal year (FY) of Vietnam International Commercial Joint Stock Bank ends
on 31 December. “FY” before a calendar year denotes the year in which the fiscal
year ends, e.g., FY2019 ends on 31 December 2019.
(ii) In this report, “$” refers to United States dollars.Vice-President Ashok Lavasa, Private Sector Operations and Public–Private Partnerships
Ahmed Saeed, Operations 2
Director General Suzanne Gaboury, Private Sector Operations Department (PSOD)
Ramesh Subramaniam, Southeast Asia Regional Department (SERD)
Deputy Director F. Cleo Kawawaki, Office of the Director General, SERD
General Christopher Thieme, Office of the Director General, PSOD
Directors Christine Engstrom, Private Sector Financial Institutions Division (PSFI),
PSOD
Andrew Jeffries, Viet Nam Resident Mission (VRM), SERD
Team leader Adnan Rafiq, Investment Specialist, PSFI, PSOD
Project advisor Paul Flegler, Principal Investment Specialist, PSFI, PSOD
Team members Genevieve Abel, Principal Transaction Support Specialist (Integrity), Private
Sector Transaction Support Division (PSTS) PSOD
Minh Chu, Senior Financial Sector Officer, VRM, SERD
Agatha Diaz, Associate Social Development Officer (Safeguards)PSTS,
PSOD
Laurence Vannut Genee, Senior Safeguard Specialist, PSTS, PSOD
Alvin Ibayan, Associate Investment Officer, Office of the Director General -
Risk Analytics Unit, PSOD
Donald Lambert, Principal Private Sector Development Specialist, VRM,
SERD
Catherine Marsh, Assistant General Counsel, Office of the General Counsel
(OGC)
Mohsin Monnoo, Senior Investment Specialist (Syndications), Office of the
Director General - Guarantees and Syndications Unit, PSOD
Jocelyn Munsayac, Principal Safeguards Specialist, PSTS, PSOD
Erika Polinag, Associate Transaction Support Officer, PSTS, PSOD
Toby Rees, Counsel, OGC
Abba Grace Sanchez, Safeguards Officer (Environment), PSTS, PSOD
Amanda Satterly, Senior Social Development Specialist (Gender and
Development), PSTS, PSOD
Floralyn L. Tubasis, Operations Assistant, PSFI, PSOD
In preparing any country program or strategy, financing any project, or by making any designation
of or reference to a particular territory or geographic area in this document, the Asian
Development Bank does not intend to make any judgments as to the legal or other status of any
territory or area.CONTENTS
Page
PROJECT AT A GLANCE
I. THE PROPOSAL 1
II. THE FINANCIAL INTERMEDIARY 1
A. Investment Identification and Description 1
B. Business Overview and Strategy 4
C. Ownership, Management, and Governance 5
D. CONFIDENTIAL INFORMATION DELETED 6
III. THE PROPOSED ADB ASSISTANCE 6
A. The Assistance 6
B. Implementation Arrangements 6
C. Value Added by ADB Assistance 6
D. CONFIDENTIAL INFORMATION DELETED 7
E. Technical Assistance 7
IV. DEVELOPMENT IMPACT AND STRATEGIC ALIGNMENT 7
A. Development Impact, Outcome, and Outputs 7
B. Alignment with ADB Strategy and Operations 8
V. POLICY COMPLIANCE 8
A. Safeguards and Social Dimensions 8
B. Anticorruption Policy 9
C. Assurances 9
VI. RECOMMENDATION 9
APPENDIXES
1. Design and Monitoring Framework 11
2. List of Linked Documents 13Project Classification Information Status: Complete
PROJECT AT A GLANCE
1. Basic Data Project Number: 53427-001
Project Name Vietnam International Bank Department/Division PSOD/PSFI
Supporting Small and
Medium-Sized Enterprises and
Improving Living Conditions
Project
Country Viet Nam, Socialist Republic of
Borrower Vietnam International
Commercial Joint Stock Bank
Portfolio at a Glance https://www.adb.org/Documents/
LinkedDocs/?id=53427-001-Port
AtaGlance
qq
2. Sector Subsector(s) ADB Financing ($ million)
Finance Small and medium enterprise finance and leasing 100.00
Total
100.00
qq
3. Operational Priorities Climate Change Information
Addressing remaining poverty and reducing inequalities GHG reductions (tons per annum) 0
Accelerating progress in gender equality Climate Change impact on the Project Low
Making cities more livable
ADB Financing
Adaptation ($ million) 0.00
Mitigation ($ million) 0.00
Cofinancing
Adaptation ($ million) 0.00
Mitigation ($ million) 0.00
Qq
Sustainable Development Goals Gender Equity and Mainstreaming
SDG 5.a Effective gender mainstreaming (EGM)
SDG 8.10
SDG 9.3 Poverty Targeting
SDG 11.1 General Intervention on Poverty
qq
4. Nonsovereign Operation Risk Rating
Obligor Name Obligor Risk Rating Facility Risk Rating
Vietnam International Commercial Joint Stock Bank
5. Safeguard Categorization Environment: FI Involuntary Resettlement: Indigenous Peoples: FI-C
FI-C
Qq
6. Financing
Modality and Sources Amount ($ million)
ADB 100.00
Nonsovereign LIBOR Based Loan (Regular Loan): Ordinary capital resources 100.00
Cofinancing 100.00
Commercial Banks (Full ADB Administration) 100.00
Others a 0.00
Total 200.00
Note: An attached technical assistance will be financed on a grant basis by the Women Entrepreneurs Finance Initiative in the amount of $500,000.
Currency of ADB Financing: US Dollar
a Derived by deducting ADB financing and Cofinancing from Total Project Cost.
Source: Asian Development Bank
This document must only be generated in eOps. 05012021170832326823 Generated Date: 05-Jan-2021 17:20:32 PMI. THE PROPOSAL
1. I submit for your approval the following report and recommendation on a proposed loan of
up to $200,000,000 to Vietnam International Commercial Joint Stock Bank (VIB), comprising (i) a
senior unsecured A loan of up to $100,000,000, and (ii) a B loan of up to $100,000,000 for the
Vietnam International Bank Supporting Small and Medium-Sized Enterprises and Improving
Living Conditions Project in Viet Nam. The report also describes the proposed administration of
technical assistance (TA) to be provided by the Women Entrepreneurs Finance Initiative (We-Fi)
for Women-Led Small and Medium-Sized Enterprises, and if the Board approves the proposed
loan, I, acting under the authority delegated to me by the Board, approve the administration of the
TA.
2. The proposed loan to VIB, one of the leading joint stock banks in Viet Nam, will provide
critically needed financing to the underserved segment of small and medium-sized enterprises
(SMEs). The SME sector is large in Viet Nam, with 98% of all businesses classified as such.1
Female borrowers are particularly underserved, and the transaction will support women-owned
and women-led SMEs (WSMEs). Additionally, the Asian Development Bank (ADB) loan will fund
VIB’s home loan business for improvements and repairs, which will contribute to improved living
conditions primarily in urban areas.
II. THE FINANCIAL INTERMEDIARY
A. Investment Identification and Description
3. Economic update. In 2019, Viet Nam recorded real gross domestic product (GDP) growth
of 7.0%, close to the average annual increase of 6.9% recorded between 2015 and 2018. Growth
was also robust in early 2020 prior to the outbreak of the coronavirus disease (COVID-19)
pandemic. Viet Nam has successfully minimized the human toll of COVID-19 to date due to early
and effective containment measures; however, the economy has been impacted. Reduced
tourism, a decline in demand from Viet Nam’s key export markets (although demand from the
People’s Republic of China has begun to recover), and weak consumer demand are projected to
lead to a GDP growth rate of 1.8%.2 The Government of Viet Nam introduced a fiscal package of
about D279 trillion (3.4% of GDP) to help offset the effects of the pandemic.3 This includes tax
deferrals, cuts, and exemptions, as well as cash transfers to affected workers and households.
Coupled with early signs of a domestic recovery, Viet Nam is expected to rebound in 2021 with a
GDP growth rate of 6.3% (footnote 3).
4. Financial sector. Viet Nam’s financial sector is still developing and remains largely bank-
centric. State-owned commercial banks and joint stock commercial banks each account for 42%
(total of 84%) of all credit institution assets. 4 Directed by policy lending, much earlier credit growth
was driven by borrowings from the network of state-owned enterprises and their affiliates. Some
of these banking practices laid the groundwork for the difficulties encountered by the banking
industry, exacerbated by the 2008 global financial crisis, and continuing in the 2012 domestic
1 International Finance Corporation, World Bank Group. 2017. Women-Owned Enterprises in Vietnam: Perceptions
and Potential. Washington, DC.
2 ADB. 2020. Asian Development Outlook 2020 Update: Wellness in Worrying Times. Manila.
3 Fitch Ratings. 2020. APAC Sovereign Credit Overview 3Q20. Hong Kong, China.
4 State Bank of Viet Nam. Key Statistical Ratios. The financial sector comprises 31 commercial banks, 2 policy banks,
16 finance companies, 11 leasing companies, 1 cooperative bank, 3 licensed microfinance institutions, 1,182
people’s credit funds, 9 wholly foreign-owned banks, 2 joint venture banks, and 49 foreign bank branches, as of the
end of fiscal year (FY) 2019.2 crisis. While immediate efforts by the regulator, the State Bank of Viet Nam (SBV), to manage these crises were effective, longer-term reform measures are still being undertaken.5 Foremost, and in line with the SBV’s strategic objective to strengthen the capital base of domestic commercial banks, the implementation of Basel II standards was planned by 2020 (now delayed to 2023), with 10 banks participating in the pilot phase. 5. More recently, the banking sector has had strong growth, paralleling the country’s overall economic expansion and responding to pent-up consumer demand, with a compound annual growth rate of 16.5% from 2015 to 2019.6 COVID-19, however, has impacted overall banking performance. During the first half of 2020, credit to the economy increased 9.7% year-on-year, below the central bank’s target of 11.0%–14.0% for 2020. Total assets as of the end of July 2020 were D12,831 trillion.7 Slowing credit growth is in line with weakening domestic demand. To boost lending, the SBV twice reduced key policy rates by 50 basis points (in March and May 2020), cutting the discount rate to 3.0% and refinancing rate to 4.5%. On 13 March 2020, the SBV issued Circular No. 01/2020/TT-NHNN directing credit institutions to restructure the repayment periods of loans, waive and reduce interest and fees, and maintain debt classifications.8 In August, the SBV reduced the deposit interest rate of the compulsory reserve by 50 basis points for commercial banks at SBV to 0.5%.9 As of September 2020, to support clients affected by COVID-19, banks have (i) restructured loans for 271,000 clients with outstanding loans of D321 trillion (estimated at about 3.7% of total outstanding bank loans), (ii) waived and lowered interest rates applied to existing loans of around D1,200 trillion for 485,000 clients (lending rates have been down by 2.5%–4.0%), and (iii) extended soft loans of D1,600 trillion to 310,000 new clients (footnote 5). 6. Small and medium-sized enterprises sector. Nearly all of Viet Nam’s businesses are SMEs, which account for approximately 98% of registered enterprises and contributed 40% of GDP and 50% of total employment in 2019.10 By economic activity, SMEs are concentrated in wholesale and trading (about 44%), manufacturing (20%), and transport and storage (7%). Access to finance is challenging and the financing gap is large, estimated at approximately $6.0 billion ($1.2 billion for women and $4.8 billion for men). A 2017 International Finance Corporation (IFC) study found that only 47% of male SME owners and 37% of women SME owners had received loans from banks in the preceding 2 years, despite government measures to support SME development (footnote 1). Constraints on women SME borrowers accessing finance include a lack of collateral, financial literacy issues, higher risk perceptions by banks, and a lack of awareness of this segment’s potential. The government views SMEs as a priority segment, as reflected in the Law on Providing Assistance for SMEs, effective January 2018, which aims to provide support to SMEs through various government-sponsored mechanisms with an emphasis on WSMEs.11 COVID-19 has particularly impacted SMEs because of lockdown and containment measures, as well as decreased domestic demand. The government has introduced various investment incentives and import duty exemptions to help support these smaller enterprises, 5 Please refer to Linked Document 1 for more details on banking sector regulations and reforms. 6 Standard and Poor’s. 7 State Bank of Viet Nam. Key statistical ratios. 8 As per Circular 1, debt payment and restructuring are allowable up to 12 months from the date of its issuance. The restructuring periods and reduction of rates and fees are at the discretion of the individual banks. 9 Moody’s Investors Services. 2020. Sector Profile, Banks—Vietnam. New York. 10 D. Shira and Associates. 2020. Vietnam Issues Investment Incentives for SMEs. Vietnam Briefing. 29 April. 11 Law on Providing Assistance to Small and Medium-Sized Enterprises. 2017. The law defines SMEs based on employees contributing to the social insurance scheme. Government initiatives include a new credit guarantee fund, tax breaks, subsidies to rent production sites in industrial zones, creation of incubators, training, and consultancies. SMEs owned by women or employing a large number of women will be given priority for support for the development of human resources (i.e., free tuition and training costs), and a 30% corporate tax reduction.
3
including a 30% reduction of the corporate income tax rate for enterprises having revenues of
less than D200 billion, which are primarily SMEs. 12
7. Urbanization and quality housing. A key objective of the Association of Southeast Asian
Nation (ASEAN) Community Vision 2025 is to raise people’s living standards, empowering them
to seize opportunities and address the challenges they will face in the coming years. 13
Urbanization is central to this process. Viet Nam’s urban population is expected to increase from
34 million in 2015 to 41 million in 2025, one of the highest rates of growth among the ASEAN
member countries (footnote 14). This structural shift will drive population growth and demand for
new homes and better quality existing housing in cities. A World Bank study noted that
approximately 20% of 24 million households reside in poor living conditions in Viet Nam.14 A low
supply of new housing for moderate to lower income homes, affordability issues, and limited
access to long-term housing finance for a majority of the population (mortgage debt to GDP is low
at approximately 16%) has increased demand for incremental loans for home improvements.15
The government also recognizes the need to support better quality housing for existing stock and
has introduced various measures supporting this objective.16
8. Rationale. Given the need to strengthen the banking sector further to enable it to reach
underserved segments and provide standard small business and retail products, and
complementing ADB’s sovereign operations to reform and modernize Viet Nam’s financial sector,
ADB has been working with banks targeting sectors where ADB can have a meaningful impact.17
ADB has identified VIB as a suitable partner to help strengthen its outreach to SMEs and provide
critically needed loans to improve urban dwellers’ living conditions. ADB has had a relationship
with VIB through its Trade Finance Program since 2009.18 VIB, the tenth largest bank in Viet Nam
by assets, supports some key SME industries in Viet Nam. VIB has also shown interest in working
with ADB to support WSMEs, a new sub-segment for banks in Viet Nam that has not yet garnered
much interest or activity. VIB also has a substantial and growing retail portfolio providing mortgage
finance loans for new homes and a large business line of home improvement loans. VIB’s digital
banking initiatives provide a competitive market advantage and provide a suite of services
efficiently supporting both retail and SME clients. Based on its digital outreach, interest in working
with WSMEs, strong financial performance, and good corporate governance, VIB is a suitable
partner through which ADB can expand access to finance to these underserved segments.
12 Decree No. 37/2020/ND-CP introduced on 30 March 2020 expanded the list of sectors and industries able to access
investment incentives under Decree 118/2015/ND-CP, which includes access to land and credit support initiatives;
and expands the list to include the following four types of SME business lines: (i) SME supply chains, (ii) business
incubators for SMEs, (iii) technical support facilities for SMEs, and (iv) co-working spaces for SMEs. These
businesses will be eligible for import duty exemptions on fixed assets, as well as other exemptions based on location.
13 ASEAN Secretariat. 2018.
ASEAN Sustainable Urbanisation Strategy. Jakarta.
14 World Bank Group. 2015. Vietnam Affordable Housing A Way Forward. Washington, DC.
15 FiinResearch. Vietnam Consumer Finance Report 2020. Ho Chi Minh.
16 The 2015 Housing Law recognizes the need to bolster incremental and self-built housing. Decree No. 64/2012/ND-
CP allows for exemptions on construction permits for renovation and small repairs projects.
17 ADB. 2018.
Report and Recommendation of the President to the Board of Directors: Proposed Loan to Joint Stock
Commercial Bank for Investment and Development of Vietnam for Mainstreaming Small and Medium-Sized
Enterprises Lending Project. Manila. Most recently, in December 2018 and June 2019, ADB disbursed an A loan of
$200 million and a B loan of $100 million to the Joint Stock Commercial Bank for Investment and Development of
Vietnam to support SMEs (project number 51321).
18 VIB has been part of the Trade Finance Program since 2009 with a current approved limit of $60.0 million as of
January 2021.4 B. Business Overview and Strategy 9. Overview. With total assets of D202 trillion as of June 2020 (a 10% increase from the previous year), VIB is one of the top tier banks in the country. It also has one wholly-owned subsidiary, VIB Asset Management Company, with charter capital of D100 billion. VIB has a large branch network with a presence in half the nation’s provinces At the end of fiscal year (FY) 2019, there were 162 outlets, including 50 full branches and 112 transaction offices. VIB’s loan portfolio grew by 34.4% in 2019, but growth slowed in 2020 due to COVID-19, and the portfolio had grown by about 17.0% as of the end of September 2020. The portfolio primarily comprises retail banking (including microlending, mortgage finance including home improvement loans, automobile loans, credit cards, and bancassurance) and corporate banking (including wholesale banking, SMEs, and treasury services). The share of retail banking in the total portfolio increased to about 83% during the pandemic. Moody’s latest Baseline Credit Assessment (as of June 2020) for VIB was B1, Counterparty Risk Assessment was Ba3, long-term (maturity of one year or more), and its local and foreign currency bank deposit rating was B1. These are some of the highest credit ratings in the market. 10. Strategy. VIB aims to become the leading retail bank in the country. As noted, digital banking is a top priority for VIB and underpins its business strategy. The bank has strengthened and optimized its legacy systems and, at the same time, invested heavily in new digital technology platforms and solutions to ensure consistency and synchronicity. This transformation has been carried out across all aspects of the business with good results, making it possible for customers to have continuous access to the bank’s services during the COVID-19 pandemic.19 11. Recognizing their business potential and importance to the economy, VIB plans to continue its support for key SME sectors such as construction, manufacturing, energy distribution, fast-moving consumer goods manufacturing, and distribution and retailing. It will avoid cyclical sectors, such as tourism and hotels, which it had previously funded. It plans to offer increased supply chain financing, liquidity solutions, advisory services, and digital banking products (such as online bank guarantee verification, advanced payment, and cash flow management solutions) to reach underserved customers including WSMEs. 12. VIB’s housing finance portfolio contains mortgage and home improvement loans. Mortgage loans were D49 trillion as of the end FY2019 and are expected to grow by 25% in 2020 and 2021. VIB plans to continue to expand its home improvement loan portfolio, given the pent up demand in this segment, which grew at a compound annual growth rate of around 31% from D10.8 trillion in 2017 to D18.5 trillion in 2019. VIB is targeting an increase of about 20% in 2021 to provide much-needed financing for the construction, repair, maintenance, and improvement of homes. VIB will continue to cross-sell its home improvement and mortgage loans to its growing retail customer base, which is primarily in major cities where VIB has a strong presence.20 19 As of the end of June 2020, the number of customers registered for digital banking increased from 601,000 in 2019 to 711,000, the number of new customers obtained from VIB’s website increased from 125,000 in 2019 to 148,000, 79% of individual customers’ financial transactions throughout the system were made through digital banking, and digital transactions reached 14 million in 2019 and 11 million in the first half of 2020 (VIB management) and www.vib.com.vn. 20 As of June 2020, residential mortgage and home improvement loans in Ho Chi Minh City and Hanoi accounts for 75% of this total portfolio.
5 C. Ownership, Management, and Governance 13. Ownership. The Commonwealth Bank of Australia (CBA) has been VIB’s strategic shareholder since 2010, when it acquired a 15% stake (subsequently increased to 20% in 2011).21 In July 2017, VIB acquired CBA’s branch in Ho Chi Minh City, as CBA sought to deepen its partnership with VIB. As of December 2020, CBA remains the largest shareholder with a 20.0% stake.22 14. ADB conducted integrity due diligence on VIB, its board of directors, shareholders, and managers. None of the companies and individuals appear to constitute a significant or potentially significant integrity risk to ADB.23 ADB’s review of the entities does not give ADB cause to believe that these have been established or are being used for money laundering or terrorism financing in the jurisdiction involved in the project. Tax integrity due diligence was not required. 15. Corporate governance. VIB benefits from best practices introduced by CBA and its representation on the board by three experienced bankers. The segregation between board and management responsibilities is clearer in VIB than in most banks in Viet Nam. Board composition nominally exceeds the regulatory requirement with two independent directors. CBA representatives include two senior executives from CBA’s international financial services subsidiary, including one appointed to the VIB board in April 2018. The third director is an executive general manager of retail and business banking at ASB Bank, CBA’s New Zealand- based commercial bank subsidiary (although he is technically considered independent under local regulations). The remaining directors consist of two major shareholders (Messrs. Dang Khac Vy and Do Xuan Hoang), a founding shareholder, the other independent director (an experienced Vietnamese lawyer), and the only executive member, VIB’s CEO. Directors serve 3-year terms and can be re-elected indefinitely (a common practice in Viet Nam). There are two board-level committees for human resources and risk management. The human resources committee has five members and is chaired by an independent director. A separate supervisory board has three full-time members (including a CBA secondee) and performs the duties typically associated with an audit committee. It reports directly to the general assembly of shareholders. 16. Management. VIB has a strong, stable 12-member board of management, many of whom have worked for foreign banks in Viet Nam. The current CEO was VIB’s chair from 2008 to 2013, and also served as the bank’s CEO from 2006 to 2008. The senior management team members have been with the bank for more than 8 years on average and bring in-depth knowledge. 17. Risk management. The independent, integrated risk management division reports to the CEO, with indirect reporting to the board risk management committee. The risk management division, which is headed by the chief risk officer, has seven departments: two for credit appraisal (retail and wholesale including financial institutions), two for collections (retail and wholesale), credit risk identification, credit risk policy, and risk monitoring and compliance. VIB is one of 10 banks participating in the SBV Basel II pilot and has been calculating its capital adequacy ratio (CAR) under Basel II on a fully automated basis since FY2016. It was also the first private bank to comply with and qualify for Basel II. 21 CBA is the largest Australian bank by profit before tax, total assets, and total equity, and is one of four dominant Australian banks in consumer lending, particularly mortgages. 22 As of June 2020, CBA had A$963,747 million in total assets, A$68,075 million in shareholder equity, and A$10,168 million in net income. 23 ADB. 2003. Enhancing the Asian Development Bank’s Role in Combating Money Laundering and the Financing of Terrorism. Manila.
6
D. CONFIDENTIAL INFORMATION DELETED
III. THE PROPOSED ADB ASSISTANCE
A. The Assistance
18. ADB will provide a 3-year senior unsecured A loan to VIB of up to $100,000,000. ADB
expects to syndicate a B loan of up to $100,000,000 among commercial banks and other eligible
B loan participants on a commercially reasonable efforts basis and subject to market conditions.
ADB will also provide a transaction technical assistance (TA) of up to $500,000 that will facilitate
increased lending to WSMEs.
B. Implementation Arrangements
19. Use of proceeds. Half of the ADB A loan will be used to support SMEs 24 , including
WSMEs. 25 The balance will be used for home improvement loans.26 The B loan will be used for
retail business loans and housing finance, including home improvements.
20. Monitoring and reporting. ADB will monitor the project throughout its duration. VIB will,
at predetermined regular intervals and as requested, provide ADB with financial reports including
(i) quarterly unaudited financial statements; (ii) annual audited financial statements; (iii) quarterly
compliance certificates for financial covenants; (iv) semiannual reporting on the SME loan
portfolio; (v) annual reporting on selected development indicators agreed upon by ADB and VIB,
including on gender targets and initiatives; and (vi) an annual environmental and social
management system performance report.
21. Evaluation. Monitoring reports will be prepared and submitted to ADB at least annually.
The first report will be submitted no later than 12 months after the first disbursement.
C. Value Added by ADB Assistance
22. Strengthening the banking sector. As noted, Viet Nam’s banking sector is evolving and
has made progress in addressing some of its systemic problems. Since 2010, several banks have
been building their retail and small business portfolios to respond to pent-up customer demand
from years of lacking standard bank products. To support the growth of its SME and home
improvement loan portfolio, which entail longer-tenor loans, VIB needs longer-tenor financing to
comply with regulatory requirements restricting the ratio of short-term funding to long-term funding
and to reduce maturity mismatch risk. Long-tenor funding is not readily available given the
relatively underdeveloped nature of the country’s capital markets, and ADB’s funding will address
this market gap.
23. Supporting the growth of small and medium-sized enterprises, including those
owned and/or led by women. ADB funding will support the growth of SMEs, which are the
backbone of the Vietnamese economy and important for job creation and economic recovery
during and after the COVID-19 pandemic. By partnering with a bank with a large network,
including in the digital space, and an established and growing SME business line, ADB can
24 VIB defines SMEs as companies with annual revenues of up to D400 billion.
25 WSMEs are defined by either (i) being at least 51% owned by women or a woman, or (ii) meeting all of the following
3 sub-criteria: (a) it is at least 20% owned by a woman or women, (b) a woman is the senior or second most senior
executive, and (c) at least 30% of the board members are women (where a board exists).
26 ADB’s funding will only be used for owner-occupied properties.7
maximize its development footprint. Targeting women borrowers is new for banks in Viet Nam
and, given VIB’s visibility in the market, this intervention is expected to serve as an example to
other banks. ADB will work closely with VIB and through TA to reach out to more WSMEs with a
promotional campaign, train women on applying for bank loans, gender-disaggregating VIB’s
management information system, and providing internal training to VIB staff on how to better
serve WSMEs. The project is classified as effective gender mainstreaming.
24. Improving living conditions. By providing long-term funding to VIB to grow its home
improvement loan portfolio further, ADB will contribute to better quality housing, which will help
Viet Nam achieve its goals of increasing productivity and inclusive urban growth. An estimated
350,000 people move to Ho Chi Minh City and Hanoi each year, and the population of Viet Nam’s
major cities has grown at around 3% each year since 2010, reaching 9 million in Ho Chi Minh City
and 8 million in Hanoi. This influx means that demand for new housing units in Ho Chi Minh City
and Hanoi combined is about 250,000 a year. With approximately 60,000 units being constructed
per year, demand far exceeds supply, particularly for moderate and lower income people. 27
Therefore, new homes and existing home stock upgrades are essential.
25. Catalyzing private sector funding. ADB is expected to provide a B loan of up to $100
million, thereby mobilizing private financing for VIB and providing an important source of
diversified funding to support the growth of their mortgage and retail business loans.
D. CONFIDENTIAL INFORMATION DELETED
E. Technical Assistance
26. The $500,000 TA will help VIB better meet the needs of WSMEs through (i) collecting
survey data to assess the impact of COVID-19 and ADB’s assistance to WSMEs; (ii) developing
VIB’s capacity to serve women by developing targeted marketing materials, training loan officers
on gender biases, and introducing a gender-disaggregated management information system; and
(iii) training women entrepreneurs on applying for bank loans.28 A grant from We-Fi will fund the
TA; it will be the first ADB nonsovereign project that benefits from We-Fi support.29 The integration
of the TA is also an example of “One ADB” collaboration, with departments across ADB working
together closely to develop and implement the TA to maximize the impact of ADB’s lending.
IV. DEVELOPMENT IMPACT AND STRATEGIC ALIGNMENT
A. Development Impact, Outcome, and Outputs
27. Impact. The project is aligned with the following impacts: Viet Nam’s vision for socially
equitable economic development, the National Action Plan for the Implementation of the 2030
Sustainable Development Agenda,30 better access to finance for the underserved population and
SMEs, and the development of the finance and housing sector as promulgated by the Housing
Law of 2015, and Law on Supporting Small and Medium Enterprises .
27 D. Nguyen. 2020. Middle Class Buyers Drive Vietnam’s Housing Market. VN Express International. 15 September.
28 Attached Technical Assistance Report (accessible from the list of linked documents in Appendix 2).
29
The Women Entrepreneurs Finance Initiative is a groundbreaking partnership that aims to unlock financing for
women-owned and women-led SMEs (WSMEs) businesses in developing countries. We-Fi’s partners include 14
donor governments, six multilateral development banks as implementing partners, and numerous other stakeholders
in the public and private sector around the world.
30 United Nations. 2017.
The National Action Plan for the Implementation of the 2030 Sustainable Development
Agenda. New York.8
28. Outcome. The project will increase financing to SMEs in a more gender equitable manner.
It will also help VIB increase its home improvement loan portfolio.
29. Outputs. The project’s outputs will be (i) increased capacity of VIB to serve SMEs and
WSMEs; (ii) strengthened capacity of VIB to serve women entrepreneurs; (iii) enhanced capacity
of women entrepreneurs; and (iv) increased capacity of VIB to expand home improvement loans.
B. Alignment with ADB Strategy and Operations
30. Consistency with ADB strategy and country strategy. The transaction supports the
following key operational priorities of ADB’s Strategy 2030: (i) addressing remaining poverty and
reducing inequalities, (ii) making cities livable, and (iii) accelerating progress in gender equality
through the gender action plan. Without access to formal financial services, underserved
segments of the population will be excluded from the growth process and its benefits. According
to ADB’s country partnership strategy, 2016–202031 and country operations business plan, 2021–
202332 for Viet Nam, ADB’s nonsovereign operations will support investments that promote more
inclusive economic growth based on promoting job creation and competitiveness. The proposed
transaction will support the development of SMEs and improvement of living conditions in Viet
Nam, which is part of the inclusive economic growth objective of the country partnership strategy
and also a high government priority, and will complement ADB’s efforts to strengthen the financial
sector under the Financial Sector Development and Inclusion Program.33
V. POLICY COMPLIANCE
A. Safeguards and Social Dimensions
31. ADB has categorized the investment in compliance with ADB’s Safeguard Policy
Statement (2009)34 as follows: environment (category FI), involuntary resettlement (category FI
treated as C), and indigenous peoples (category FI treated as C).
32. ADB has conducted a desktop review of the investment's potential environment and social
impacts, its risks associated with VIB’s existing or likely future portfolio, and its commitment and
capacity for environmental and social management. VIB will use the proposed loan to support
SMEs and home loan improvements. VIB has an existing environment and social management
system (ESMS) that defines procedures and institutional arrangements to identify, mitigate and
address environmental and social impacts. The review, however, identified the need to enhance
VIB’s existing ESMS to comply with ADB’s Safeguard Policy Statement and social requirements.
VIB will enhance its existing ESMS prior to disbursement. The enhanced ESMS will (i) harmonize
the VIB exclusion list with the ADB prohibited investment activity list; (ii) enhance screening
procedures to determine the risk categorization based on the definition in ADB’s Safeguard Policy
Statement to indicate clearly credit accounts’ risks to the environment, involuntary resettlement,
and indigenous peoples; (iii) develop and provide environment, social, health and safety training
to staff and relevant third parties; and (iv) develop a systematic documentation of the grievances
received and actions carried out to resolve the issues. VIB will also ensure compliance with
31 ADB. 2016. Country Partnership Strategy: Fostering More Inclusive and Environmentally Sustainable Growth: Viet
Nam and Asian Development Bank, 2016–2020. Manila.
32 ADB. 2020. Country Operations Business Plan: Viet Nam, 2021–2023. Manila.
33 ADB. 2018. Report and Recommendation of the President to the Board of Directors: Proposed Pragmatic Approach
and Policy Based Loan for Subprogram 1 to Socialist Republic of Viet Nam: Financial Sector Development Program
and Inclusion Program. Manila.
34 ADB. Safeguard Categories. Manila.9
applicable national laws and regulations, inclusive of national labor laws and measures, to comply
with internationally recognized core labor standards, pursuant to ADB’s Social Protection
Strategy. VIB will not use ADB funding to finance projects classified as category A for
environmental impacts or category A or B for involuntary resettlement or indigenous peoples. VIB
will report annually to ADB on its compliance with environmental and social requirements and with
national and international laws and standards.
33. Effective gender mainstreaming. VIB, like many banks in the Vietnamese market, does
not currently prioritize WSMEs, resulting in a lack of information on their needs,35 no targeted
marketing materials, and loan officers not sensitized to the business case for WSMEs as
customers. VIB has regulations against sexual harassment in its Code of Conduct. More than half
of VIB’s staff (57%) are female, with 41% of management roles and 60% of professional roles
being held by women. Following ADB’s Policy on Gender and Development (1998), VIB has
incorporated measures to promote gender equality and/or women’s empowerment in its business
activities. Key features of the gender action plan are as follows: (i) increase the number of WSME
borrowers; (ii) increase lending to WSMEs; (iii) improve understanding of the impact of VIB’s
lending on WSMEs; (iv) develop marketing materials targeting WSMEs; (v) train VIB staff on how
to better serve WSMEs; and (vi) train women entrepreneurs on VIB loan products and application
processes. VIB will submit periodic reports on the implementation of gender measures to ADB.
B. Anticorruption Policy
34. VIB was advised of ADB’s policy of implementing best international practices relating to
combating corruption, money laundering, and the financing of terrorism. ADB will ensure that the
investment documentation includes appropriate provisions prohibiting corruption, money
laundering, and the financing of terrorism; and remedies for ADB in the event of noncompliance.
35. CONFIDENTIAL INFORMATION DELETED
C. Assurances
36. Consistent with the Agreement Establishing the Asian Development Bank (the Charter),36
ADB will proceed with the proposed assistance upon establishing that the Government of Viet
Nam has no objection to the proposed assistance to VIB. ADB will enter into suitable finance
documentation, in form and substance satisfactory to ADB, following approval of the proposed
assistance by the Board of Directors.
VI. RECOMMENDATION
37. I am satisfied that the proposed loan would comply with the Articles of Agreement of the
Asian Development Bank (ADB) and recommend that the Board approve the loan of up to
$200,000,000, comprising (i) a senior unsecured A loan of up to $100,000,000 from ADB’s
ordinary capital resources and (ii) a B loan of up to $100,000,000 to Vietnam International
Commercial Joint Stock Bank for the Vietnam International Bank Supporting Small and Medium-
Sized Enterprises and Improving Living Conditions Project in Viet Nam, with such terms and
35 VIB does not currently have gender-disaggregated data on its borrowers. The Government Statistics Office reported
in 2015 that 22% of SMEs in Viet Nam are women-owned; this national average is a proxy for VIB’s gender
breakdown.
36 ADB. 1966. Agreement Establishing the Asian Development Bank. Manila.10
conditions as are substantially in accordance with those set forth in this report, and as may be
reported to the Board.
Masatsugu Asakawa
President
24 February 2021Appendix 1 11
DESIGN AND MONITORING FRAMEWORK
Impact the Project is Aligned with
Viet Nam’s vision for socially equitable economic development, the National Action Plan for the
Implementation of the 2030 Sustainable Development Agenda; better access to finance for the
underserved population, SMEs, and the development of the finance and housing sector. a
Data Sources and
Reporting Risks and Critical
Results Chain Performance Indicators Mechanisms Assumptions
Outcome By 2023
Financing to SMEs in a) At least Xx WSME a–c. Annual Macroeconomic
a gender-equitable additional borrowers financed development conditions
manner and for home (cumulative, starting January effectiveness deteriorate as a
improvements 2021; 2020 baseline: Xx)b monitoring reports of result of the COVID-
increased [OP 2.1.3] VIB 19 pandemic,
hampering the
b) Outstanding SME portfolio demand for SME
increased by $Xx, at least and home
Xx% on-lent to WSMEs (2020 improvement loans.
baseline: $Xx; data not
available for WSMEs)b Changed regulatory
requirements for SMEs
c) Outstanding home or home improvement
improvement loan portfolio loans.
increased by $Xx (2020
baseline: $Xx)
Outputs By 2023
1. Increased capacity 1a. At least $Xx cumulatively 1 – 4. Annual Market or demand
of VIB to serve SMEs on-lent to SMEs (2020 development does not grow as
and WSMEs baseline: $Xx) effectiveness forecasted.
monitoring reports of
1b. At least $Xx annually on- VIB (2a c and 3a based
lent to WSMEs (2020 on consultant reports)
baseline: Xx)
2a. At least Xx promotional
2. VIB’s capacity to video or brochure created
serve women targeting WSMEs promoting
entrepreneurs VIB’s financial products (2020
strengthened baseline: Xx)
2b. At least Xx% of VIB loan
officers trained on how to
serve WSMEs better (2020
baseline: Xx) [OP 1.1.1]
2c. A management
information system that can
produce gender-
disaggregated reports
introduced (2020 baseline:
Xx)12 Appendix 1
Data Sources and
Reporting Risks and Critical
Results Chain Performance Indicators Mechanisms Assumptions
3a. At least Xx workshops
3. Capacity of women realized that train women
entrepreneurs entrepreneurs how to apply
enhanced for loans and about different
VIB loan products, (2020
baseline: Xx)
4a. At least $Xx billion
4. VIB’s capacity to cumulatively on-lent for home
expand home improvement loans (2020
improvement loans baseline: $Xx million) [OP
increased 4.1.2]
Key Activities with Milestones
Output 1 to 4
1.1 ADB and B loan participants execute legal agreements (Q1 2021).
1.2 ADB direct loan and B loan are fully disbursed (Q1 2021).
2. VIB’s capacity to serve women entrepreneurs strengthened
2.1 VIB prepares a video or other promotional material targeting WSMEs (Q3–Q4 2021).
2.2 Consultant develops an online training program on gender biases for VIB loan officers (Q3–Q4 2021).
2.3 VIB develops gender-disaggregated management information system reporting (Q3 2021–Q1 2022).
2.4 VIB facilitates a consultant survey of WSMEs on the impact of on-lending (Q1 2021–Q4 2023).
2.5 VIB loan officers complete training on gender bias (Q1 2022–Q2 2022).
3. Capacity of women entrepreneurs enhanced
3.1 VIB and consultant develop a training workshop for women entrepreneurs on how to apply for a loan
and what different loan products are available (Q4 2021).
3.2 VIB holds Xx iterations of the workshop at different locations around Viet Nam (Q1 2022–Q4 2022).
Inputs
ADB: Up to $200 million ($100 million senior A loan and $100 million B loan)
Women Entrepreneurs Finance Initiative: $0.5 million technical assistance
ADB = Asian Development Bank, H = half, n.a. = not applicable, Q = quarter, SBV = State Bank of Viet Nam,
SMEs = small and medium-sized enterprises, VIB = Vietnam International Commercial Joint Stock Bank,
WSMEs = women owned and women-led SMEs.
a
Government of Viet Nam. 2017. National Action Plan for the Implementation of the 2030 Sustainable Development
Agenda. Hanoi; Law on Supporting Small and Medium Enterprises; Housing Law of 2015.
b VIB’s management information system does not generate gender-disaggregated reports. The ADB technical
assistance will develop this capacity by year end 2022.
Contribution to Strategy 2030 Operational Priorities
Expected values and methodological details for all OP indicators to which this project will contribute results are detailed
in Contribution to Strategy 2030 Operational Priorities (accessible from the list of linked documents in Appendix 2). This
project will contribute results for:
OP 1.1.1 People enrolled in improved education and/or training (number)
OP 2.1.3 Women-owned or -led SME loan accounts opened or women-owned or -led end borrowers reached (number)
OP 4.1.2 Urban infrastructure assets established or improved (number)Appendix 2 13
LIST OF LINKED DOCUMENTS
http://www.adb.org/Documents/RRPs/?id=53427-001-4
1. Country Economic Indicators
2. Attached Technical Assistance ReportYou can also read
