ADB to provide $100 million guarantees to support trade finance in Vietnam

By An Hong   March 4, 2016 | 07:30 pm GMT+7

The Asian Development Bank (ADB) has pledged to provide guarantees of up to $100 million a year to support trade finance in Vietnam through two more commercial banks.

The ADB, under its Trade Finance Program (TFP), will immediately provide the guarantees to the unlisted Ho Chi Minh City Development Bank (HD Bank) and Saigon - Hanoi Commercial Bank (SHB), one of Vietnam's biggest partly-private lenders by assets.

The ADB, under the agreements with HD Bank and SHB, has placed a cap of $25 million on its guarantees for each of the two lenders.

However since the average maximum amount of time for trade contracts in which the ADB financing could be transacted under the TFP in Vietnam is six months, the ADB will be able to support up to $50 million a year in trade transactions through each bank, said Santosh Pokharel, the program relationship manager in an email to VnExpress.

He also added that the ADB would annually review the financing with the two banks so that it could determine whether and how much to extend its guarantees.

The new agreements add to nine other existing bank partnerships under the program.

The aim of the program is that through guarantees, the ADB is assumed to take on risks for commercial banks in developing countries whose credit ratings are not good enough to successfully conduct transactions with international banks.

“ADB and our new Vietnamese bank partners will support exporting and importing companies, including small and medium-sized enterprises,” said Steven Beck, ADB’s head of trade finance. 

ADB’s Trade Finance Program has been operating in Vietnam since 2009. Since then the program has supported $6.5 billion in trade in Vietnam of which $2.1 billion was financed by ADB and $4.4 billion was co-financed by the private sector, ADB’s figures show.

Backed by ADB's AAA credit rating, the TFP provides guarantees and loans to over 200 partner banks to support trade, enabling more companies throughout Asia to engage in import and export activities in various sectors ranging from commodities and capital goods, to medical supplies and consumer goods.