Registry eyed to bridge Vietnam’s $90b trade finance gap

It is expected to boost small importers and exporters’ access to bank credit.

UK’s fintechs will help Vietnam plug a $90b trade finance gap through a national trade finance registry, which could improve credit access amongst small and medium enterprises (SME).

The registry could “increase transparency, improve data flows, provide better risk management, and reduce the documentation required” for small importers and exporters, British Consul General Alexandra Smith told the Asian Banking and Finance and Insurance Asia Summit in Ho Chi Minh City on 13 May.

Five of Vietnam’s largest banks account for 60% of trade financing in the country but they still rely on manual documentation and traditional verification, she pointed out.

Smith said British fintechs are working with Vietnamese banks with digital solutions to boost fraud detection in trade finance and gain the trust of SMEs.

Many Vietnamese SMEs also are unaware that they could secure funding for their international trade transactions, she said.

Many SMEs, particularly importers and exporters, are deterred by excessive collateral requirements and complex application processes when seeking financial loans from local banks, according to an International Finance Corp. and World Trade Organisation report.

Vietnamese banks reject an average of 12% of trade finance applications, mostly from SMEs, they said. Improving access to trade finance could lift Vietnam’s imports and exports by as much as 9%, potentially unlocking $55b in annual merchandise trade.

Vietnam had more than 940,000 active businesses last year, with SMEs accounting for 98% of the total, according to the Ministry of Planning and Investment. 

Vietnam alone accounts for more than a quarter of the Association of Southeast Asian Nations’ (ASEAN) $350b to $400b trade finance gap, the envoy said.

Aside from the registry push, the UK is also helping pilot a sandbox for fintech solutions that will focus on scoring tools to improve credit access for the underbanked, secure and standardised data sharing between banks and vendors, and peer-to-peer lending platforms.

“Enabling regulation is central to a thriving fintech scene,” Smith said, adding that the sandbox would ensure that innovation aligns with regulations.

Vietnam’s financial service sector accounts for 4.9% of economic output, and for growth to continue, that share must expand, Smith said.

The envoy also said the UK is providing direct development assistance through a $33.7m (£25m) ASEAN economic integration programme that seeks to boost financial access and resilience across member states, including Vietnam.

Bilateral trade between the UK and Vietnam has doubled in the past decade, surpassing $8.1b (£6b) last year, Smith said.

She said the UK Export Finance is supporting cross-border transactions, particularly for infrastructure and large-scale procurement. “UK Export Finance’s timely assistance is crucial to navigating global trade disruptions.”

“We remain committed to free, open, and fair trade,” she said, adding that Vietnam is a “trusted partner in both prosperous and challenging times.”