Vietnam is a rapidly developing country with a growing economy. It is very well known as an essential manufacturing center for an extensive variety of industries, including electronics, textiles, and food and beverage.
The demand for supply chain finance has increased as the Vietnamese economy is growing. Supply chain finance is an example of financing that supports businesses to maximize cash flow and lower their risk.
Some examples of different types of supply chain finance:
- Working Capital Financing: It is used to finance working capital needs such as supplier and distributor payments. This can support businesses in streamlining their cash flow while lowering any financial difficulties.
- Trade Financing: Supply chain finance can be used to support trade transactions such as the import and export of goods. This has a positive impact on businesses in developing into new markets and boosting their operations.
- Inventory Financing: Supply chain finance practice can be used to fund inventory purchases. This can assist companies in avoiding stockouts and meeting client demand.
Challenges of Supply Chain Finance in Vietnam
Even though there are numerous benefits of supply chain finance practice, businesses in Vietnam still encounter obstacles when it comes to financing.
Lack of understanding of supply chain finance products is one of the challenges businesses have to overcome. Some businesses in Vietnam are unaware of the many types of supply chain finance instruments available as well as the benefits that these products can provide.
Another challenge is the lack of access to traditional bank financing. Many businesses in Vietnam are small and medium-sized enterprises (SMEs), which often have difficulty accessing financing from traditional banks.
Adapting to a Changing Landscape
The supply chain finance landscape in Vietnam is constantly changing. Several new parties in the market have emerged, including financial technology (fintech) companies and non-bank financial institutions. These parties provide a greater variety of supply chain finance products and services, which makes it easier for businesses to seek funding.
The Vietnamese government is actively encouraging the growth of supply chain financing in business practices. The State Bank of Vietnam issued a circular on supply chain finance development in 2022. The circular provides instructions on the implementation of the supply chain finance program and highlights several actions to help the businesses grow.
Vietnam's SCF market is estimated at a substantial USD 121.39 billion, which is four times larger than that of Indonesia for example. This significant market size indicates a strong potential for business growth in Vietnam. Such growth is likely to lead to increased expenditures in banking technology, as financial institutions will need to invest in advanced SCF solutions to meet market demands and maintain competitiveness.
The changing landscape of the supply chain finance market in Vietnam presents several opportunities for businesses. One opportunity is to access new sources of financing. The entry of new players into the market has made it easier for businesses to access financing, even if they are SMEs. Another opportunity is to use new technologies to improve supply chain efficiency. Fintech companies are developing new technologies that can help businesses streamline their supply chains and improve their cash flow.
In conclusion
Vietnam's growing economy and pivotal role in various industries have driven an escalating demand for supply chain finance. Despite challenges such as limited awareness and access, the landscape is evolving with the entry of fintech firms and non-bank financial institutions, offering a diverse range of financial products. The government's proactive measures, exemplified by the 2022 circular from the State Bank of Vietnam, underscore a commitment to fostering supply chain finance development. With an estimated market size of USD 121.39 billion, four times larger than neighboring Indonesia, Vietnam presents substantial opportunities for businesses. This transformative phase not only facilitates easier access to financing, especially for SMEs but also encourages the adoption of cutting-edge technologies to enhance supply chain efficiency, reinforcing the country's position as a competitive player in the global market.
ASYX is expanding its regional presence and services into the Vietnamese market. The growing demand for supply chain finance, coupled with the government's active encouragement and the emergence of diverse financial players, underscores the potential for success in this dynamic market. By leveraging ASYX's expertise in providing innovative supply chain finance solutions, we can play a pivotal role in addressing the financing challenges faced by businesses in Vietnam. Contact us today and let us show you how you can grow your business with innovative supply chain finance solutions.
