IFC, LeapFrog Investments and DEG-Deutsche Investitions- und Entwicklungsgesellschaft have invested US$165 million in convertible Tier 2 bonds issued by Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank) to help increase lending to retail and small and medium enterprises (SMEs), including women-owned or -led ones.
As Viet Nam accelerates economic recovery amid COVID-19, SMEs, which account for 98 per cent of all businesses in Viet Nam, need more working capital urgently to sustain operations and recovery from COVID-19.
IFC and its Asset Management Company (AMC), LeapFrog Investments, and DEG-the German Development Finance Institution have respectively subscribed $95 million, $60 million, and $10 million to the US dollar-denominated five-year-plus-on-day convertible Tier 2 bonds. The investors will have the option to convert the bonds into common shares of HDBank over the mutually agreed time period.
“The funds give us greater ability to offer thousands of additional loans to retail, rural, and smaller businesses, including women entrepreneurs, who need finance to sustain through the COVID-19 crisis and beyond,” said Pham Quoc Thanh, HDBank Chief Executive Officer.
Over the last few years, HDBank has been focusing on expanding lending to SMEs, especially those in rural areas – this segment currently accounts for about half of the bank’s portfolio. With one of the largest rural networks among Vietnamese banks, it aims to significantly grow the number of its rural customers, mainly small-scale agri-based and informal businesses.
The funds will also help HDBank enhance its environmental and social (E&S) risk management capacity by introducing IFC Performance Standards while improving the bank’s corporate governance policies in line with international best practices, including a commitment to not fund coal-related projects.
“Our investment not only enables HDBank to strengthen its capital base to seize growth opportunities and further expand its core business of lending to SMEs but also sends a positive signal to boost international investor confidence in the resilience of Viet Nam’s financial sector and the country’s continued growth prospects, despite the impacts of an ongoing global pandemic,” said Kyle Kelhofer, IFC Country Manager for Viet Nam, Cambodia, and Lao PDR. — VNS