World Bank, SBV sign US$200 million for better access to rural finance

Contact:
In Vietnam: Ngan Hong Nguyen
Phone: +84-4-9346600 ext. 234
Email: nnguyen5@worldbank.org

Hanoi, November 14, 2008 — The World Bank and the State Bank of Vietnam today signed the credit and related agreements, in which the World Bank will provide US$200 million to Vietnam to help improve the Vietnamese farmers’ access to finance.

The money–coming from the International Development Association (IDA), the World Bank’s concessional lending arm for low income countries–will be used for the Vietnam Third Rural Finance Project. IDA will provide US$200 million out of the total US$230 million project cost.

The Project aims to provide loans for investments in productive assets and associated working capital needs for micro and small enterprises with less than 50 employees, providing micro credit to the rural population, and assisting the participating credit and financial institutions to render better services and develop new products for the rural areas.

“The lack of medium and long-term funds available to banks constrains their ability to provide longer term loans for much needed capital investment by small and medium-sized enterprises,” said Martin Rama, the World Bank Acting Country Director for Vietnam.

“The $200 million project is the third in series of rural finance program which has brought far reaching impact on advancing the development of the rural finance system in Vietnam,” Rama added.

The majority of the money provided under the Project will be use for the “Rural Development Fund” (US$175 million) to boost rural enteprises’ investment, and increase access of the rural poor to microfinance with the “Micro-finance Loan Fund” (US$10 million).

The money will be channelled through the Bank for Investment and Development of Vietnam (BIDV), which performs a wholesale banking function in disbursing the funds to the other financial institution, In turn, the financial institutions will make loans with market rates to the rural households and enterprises based on eligible criteria including financial soundness, environment compliance, employment generation impact, etc.

Find out more about the Vietnam Third Rural Finance Project.