CHALLENGES OF DIGITAL

SME FINANCE INNOVATION IN

VIETNAM
Tran Thi Lan Anh – State Bank in Vietnam

October 2018
The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development
Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee
the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not
necessarily be consistent with ADB official terms.
 MAIN CONTENTS
I. OVERVIEW ON SME DEVELOPMENT AND
DIGITAL SME FINANCE INNOVATION IN
VIETNAM
II. CHALLENGES OF DIGITAL INNOVATION FOR
SME FINANCE IN VIETNAM
III. POLICY RECOMMENDATION
 OVERVIEW
1. SME DEVELOPMENT IN VIETNAM
Country background:
- VN population: over 94,6 million people.
- Total area: 331.230 km2 , mountainous area
accounts for 3/4 of the country.
- A developing economy: Annual economic
growth in the last 3 years around 6,2-6,8%.
- Decreasing proportion of agricultural sector
and increasing proportion of industrial and
service sector.
 1. SME DEVELOPMENT IN VIETNAM

SME development - facts and figures:

- Number of active SMEs: 635,000 (98% of
active enterprises in VN)
- SME contribution: 45% of GDP, 31% of state
budget, over 5 million jobs.
- SME Support Law: passed 12/06/2017,
enforced 01/01/2018.
 SME Support Law
Human
Credit Tax and
resource
access accounting
development

Information Production
and legal Support place
consultation

Technology, SME
Market incubators, SME
expansion technical support
centers, communal
working place
 SME Support Law

SMEs transformed
from household SME finance access
business, support channels

Small and medium- SME Development Fund

Focus on

sized innovative
startups,
SME Credit Guarantee
Fund
SMEs participating in
value chain or in Innovative Startup
sectoral link clusters. Investment Fund.
 2. SME FINANCE IN VIETNAM
2.1. SME access to finance:
- Over 270,000 SMEs (42,5% of active SMEs in
VN) with outstanding loans from credit
institutions.
- Increasing outstanding balance for SME in
recent years
- Up to 30/6/2018, SME outstanding balance
reached 1.402.890 billion VN dong (60 billion
USD), increased 4,48% compared with 2017,
accounting for 21% of the total outstanding
balance.
 SME outstanding balance
(billion USD)
70

60

50

SME outstanding
40
balance (billion
USD)
30

20

10

0
31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017
 2.2. Digital finance and fintech development

Digital finance and Fintech

market drivers

Sharp increase Government’s

Growing interest
in Internet and desire to boost
of foreign
smartphone financial
investors
penetration innovation
 Digital finance and fintech development
Fintech market in VN: on the rise, hit $4.4 billion in 2017, est.
$7.8 billion by 2020

Digital finance in VN: digital payments, P2P lending, credit

scoring, wealth management, and personal finance. Dominated
by digital payment sector

VN banks: in the first phase of digital revolution

Insufficient legal framework for fintech and digital financial

solutions, mostly adjust payment sector, not other sector such
as P2P lending or crowdfunding
 Digital finance and fintech market
Key players

Digital finance services: provided

by fintech firms and innovative
financial service providers.

80 operational fintech firms

provide varied financial services:
payments & remittances, crypto
currency & personal finance
management.
Peer-to-peer lending in VN

1. No legal framework
2. Existed some P2P platforms

Timma, Vaymuon, Mofin and

Lendbiz: target at individual
consumer loan

Lendbiz targets at small and

medium-sized enterprises
EXISTING POLICIES ON IMPLEMENTING DIGITAL
TECHNOLOGY TO ENHANCE SME FINANCE

The financial scheme to develop non-cash

payments in VN from 2016 to 2020 (2016) (i)

The financial scheme to support the national

innovative startup ecosystem toward 2025 (2016)

Establishment of Steering Committee in Fintech

(2017), to assess current fintech ecosystem in VN,
make recommendations on establishing legal and
management framework for fintech in VN (ii)
CHALLENGES OF USING DIGITAL FINANCIAL SOLUTIONS
TO ENHANCE SME FINANCE
Insufficient legal framework and policy makers’ expertise in the
field to ensure inclusive development of the sector
Low literacy in finance and digital technology, difficult to adopt
innovative digital financing solutions
Outdated banking systems in VN prevent the integration of new
fintech technology solutions into Vietnamese
The deeply entrenched culture of using cash, great barrier of a
direct leapfrog from cash to digital instruments
Lack of SME database for executing alternative non-collateral
required financing models
Huge challenge of risk management due to high technology
crime, limited internet security capacity
 POLICY RECOMMENDATION
Promote financial inclusion – a comprehensive solution covering
different aspects of SMEs finance
Develop a sufficient legal framework, improve expertise and
capability of digital finance for policy makers so as to boost the
development and ensure proper operation of the sector

Promote investment in internet security in order to improve risk

management capacity and control high technology crime
Enhance people’s knowledge of finance through promoting
financial education including training on digital finance
Encourage banking systems to modernize and invest more into
banking technology to adapt to digital finance development
Develop SME database