By Neeli Shailesh Shah and Van Anh Chu
When she took over her family’s small star anise factory in the northern mountainous province of Lang Son in 2013, Nguyen Thi Huyen’s ambition was simple: to build Vietnam’s leading organic spice company over the next 10 years.
Five years later, she was well on her path of growth, boosted by access to funds to meet her ambitious goals. By 2019, her family-run business Vinasamex had expanded into organic cinnamon production. The company managed over 700 hectares of cinnamon, grown by 500 smallholder-farmers in Yen Bai, another mountainous province in the country’s north and home to several ethnic minorities.
When Huyen took over the family business, the spices produced by the company were in her words “lower value,” destined for “easy markets” within Asia. It had been a visit to an international spice fair in 2012, right after earning her university degree, that showed Huyen the potential to seek new markets, thanks to the huge worldwide demand for high quality spices.
Step by step, Huyen partnered with local non-governmental organizations to work with farmers and agronomists in Yen Bai to set up organic farming areas — key to building the company’s own supply chain. Within just five years, Vinasamex obtained four international standard certificates for its cinnamon and star anise production, opening up potential access to high-value markets in Europe, East Asia and the United States.
With plans to expand growing areas and set up more processing factories in other northern provinces, Huyen was in need of financing. The funding in the form of a $300,000 loan from a client bank of IFC, Oriental Joint Stock Commercial Bank (OCB) in 2019 gave her additional working capital to purchase production materials for the new factories. The financing also allowed her to run training programs on sustainable organic farming for the farmers she depended on, especially in new areas.
“I was really surprised at how quickly I was accepted with a loan. It was contrary to what I had observed, which was that banks tended to be reluctant to finance a female entrepreneur,” Huyen shared about her experience with OCB.
A win-win approach
Huyen’s perceptions are backed up by the numbers. In a report by the Vietnam Chamber of Commerce and Industry in 2020, one third of women-owned or -led businesses in Vietnam cited access to finance as a top barrier to doing business. An IFC market study in 2017 revealed the financing gap was estimated at $1.19 billion for women-owned small and medium enterprises (WSMEs) in Vietnam.
Women run one fourth of the country’s total businesses, with Vietnamese women entrepreneurs bringing in similar average annual revenue as men, and growing at a pace of over 20 percent. Yet, when it comes to bank loans, the women leading the enterprises tend to get a rough deal compared to men. Most banks either feel there is no need for a different approach to women entrepreneurs or see women in business as less profitable, higher risk, and lacking in financial management skills. As a result, in the absence of uniquely tailored products and services for these underserved women, banks are missing the opportunity to capture a growing market of savvy businesswomen while WSMEs are unable to unlock their vast under-tapped potential.
“Women entrepreneurs are often overlooked and face challenges to financing, owning, and growing a business,” said Nguyen Dinh Tung, OCB Chief Executive Officer.
Realizing the potential of this underserved segment, OCB, with a $100 million long-term loan from IFC has been promoting lending to women entrepreneurs like Huyen. With IFC’s support, the lender took a new approach as it knew business life was different for women than for men.
“In Vietnam, business discussion often takes place over a hard drink,” said Pham Thi Hoa, also an OCB client. She started in the garment business but, 20 years later, expanded into hardwood flooring, creating an export company which needed a loan for new equipment and workers. “I needed to find my own way, which is listening and learning from my peers, extending my network through networking events, and learning by doing,” she said.
With her track record, many banks approached Hoa to offer financing, but it was OCB that sealed the deal. Networking opportunities that OCB offered are particularly important for women entrepreneurs who, Hoa says “cannot go out everywhere every day to get to know people and find business opportunities as men do.”
Huyen of Vinasamex describes a similar experience or need. “Alongside financing, banks can give more support by setting up a network of WSME clients, helping them connect with more business partners and friends, giving a platform for them to share and learn from each other, and new business opportunities will arise,” Huyen said.
Being the first bank receiving a loan from IFC under its partnership with Women Entrepreneurs Finance Initiative (We-Fi) to expand financial and market access to women, OCB aims to use at least 50 percent of its loan proceeds to finance WSMEs. Huyen’s total credit line with OCB is now almost triple her first loan, a move that seems to match her expansion plans. Vinasamex’s 700 hectares of land planted with cinnamon in 2019, when she applied for her first OCB loan, is now, just two years later, three times the size at 2,200 hectares. Instead of 500 smallholders growing for Vinasamex, there are 1,500 now — half of them ethnic minorities. Newly trained in organic farming practices, the smallholders on average earn four times as much, roughly $6,000 per hectare.
In 2020, Vinasamex exported $8 million worth of cinnamon, star anise, ginger and pepper to markets in Japan, Korea, and Europe. And when COVID-19 drove up unemployment in Vietnam’s big cities, Vinasamex was able to hire many Yen Bai natives back to their hometown to work in the cinnamon fields.
Hoa, the hardwood flooring entrepreneur, used her loan to buy equipment and hire 50 new workers to increase product exporting in the past two years. “We believe that providing the requisite financial and banking services will enable smaller businesses, especially WSMES to further grow and improve their performance and resilience in the context of increased competition and business disruption,” said Tung at OCB.
OCB’s female clients are encouraged by their success and hopeful about the future. “I am glad to see my business grow, livelihood of farmers in my supply chain improve, and the nature in the cultivation areas be preserved,” Huyen said.
As a mother, Hoa has an important advice for her son, who is helping her to run the business: “Passion and continuous learning make success. Learn from practices and people around you, as more heads are always better than one.”
Published in April 2022