Hanh is 27 years old and has two university degrees. Three years ago, she gave up her job in a government ministry and decided to go into business for herself. With a background in fashion design, Hanh wanted to open up a bridal gown shop in Hanoi, but her limited capital meant she could only afford two sewing machines. Through hard work and determination, Hanh was able to turn her one shop and two sewing machines into a business that now has two showrooms and two production facilities. But her plans do not stop there. Hanh now wants to open three more showrooms and a production facility in an industrial zone in Thanh Hoa, her home province. She is also looking to expand her product line to include evening dresses under her own label.
Hanh is a great example of Vietnam’s new entrepreneurs and household business owners who dominate the country’s rapidly expanding private sector. The government has come to recognize the value of these small and medium-sized enterprises, and has designated development of the private sector as a main tenet of its poverty reduction strategy.
However, significant constraints remain – particularly in access to finance, where a large segment of the private sector and population is either underserved or excluded. Currently, only 30% of households and private enterprises are able to access loans. While the country’s banking and finance sector has predominantly focused on large corporate clients, lending procedures have not addressed the needs and abilities of small businesses and people like Hanh, who often do not have the fixed asset collateral the banks require. Furthermore, current product and distribution channels are unable to serve large numbers of clients or reach large portions of the population.
Fortunately, for Hanh and others, the banking and finance sector is waking up to the potential of the SME market. Techcombank is working together with IFC MPDF to develop an SME finance strategy and new products that target household businesses. The work is a part of IFC MPDF’s larger Vietnam Bank Advisory Project, which advises individual banks and helps create modern lending operations and specifically tailored strategies and capacities for SME banking. IFC MPDF is working with the banks and their leasing subsidiaries to develop and pilot projects and evaluate how each bank can improve on targeting and serving specific customers. These efforts ultimately contribute to more equitable growth and greater opportunities for Vietnamese to obtain the means to improve their lives.
Hanh was able to borrow VND 250m (approximately US$ 15,625) - without collateral - from Techcombank to purchase more materials to meet the demand for the upcoming autumn and winter wedding seasons. With a production of up to 6,000 gowns a year, Hanh supplies the Hanoi and northern Vietnam markets, but has her sights set on Ho Chi Minh City and neighboring regional markets. It won’t be easy; Ho Chi Minh City is a more sophisticated and developed market. But there are encouraging signs: Hanh sold her first dress and signed her first contract in Ho Chi Minh City this past summer.
