Entrepreneurs rarely like to reflect on their failures. But for Ho Thi Hai Ngan, a 33-year-old businesswoman from Vietnam, lessons she learned when her first two commercial ventures shuttered paved the way for her eventual success. The most important takeaway was to secure enough funding to expand her next business, an electronics shop she and her husband opened in 2016.
This need for capital is common among small- and medium-enterprise (SME) business owners. But it can be problematic for women, who often face lenders’ biases as well as roadblocks related to lack of collateral.
When Ngan’s shop started doing well, she looked to Vietnam Prosperity Commercial Joint Stock Bank (VPBank), an IFC partner, to help it grow even more. VPBank loaned her $25,000—with receivables pledged as security. It turned out to be a turning point for the business. The funding allowed her to explore new corporate clients in the neighborhood, and she started installing air-conditioning systems for these offices. The company is now worth $400,000, a fourfold increase in the six months since Ngan received the loan.
Those are exactly the kind of results IFC envisioned when we provided a $125 million financing package to VPBank in 2016. Twenty-five percent of IFC’s funding came from the Women Entrepreneurs Opportunity Facility (WEOF), a global facility with funding earmarked for the exclusive use of female entrepreneurs.
The WEOF was launched by IFC’s Banking on Women program and Goldman Sachs’ 10,000 Women initiative in 2014, in response to the wide credit gap for women-owned enterprises. IFC estimates that the unmet credit demand for SMEs owned by women in developing countries reaches $1.5 trillion. Our goal was to make it easier for banks to lend to small businesses and women-owned SMEs, like Ngan’s electronics shop.
This is especially important in Vietnam, where SMEs are vital to the economy. They comprise more than 98 percent of the businesses and are responsible for 50 percent of employment across the country.
However, one key segment of this market—women-owned SMEs—remains especially vulnerable. A recent IFC market study finds the financing gap at $1.19 billion for women-owned SMEs throughout Vietnam. Even though female entrepreneurs bring in an average annual revenue similar to men’s, women in Vietnam still receive fewer bank loans than their male counterparts.
This limits opportunities for women—and that’s where VPBank saw a chance to make a difference. It was one of the first Vietnamese banks to adopt a strategy specifically designed for women-owned SMEs. Its partnership with IFC goes beyond funding; it includes advice from IFC to facilitate access to non-financial services for women-owned SMEs, making it possible for these entrepreneurs to share experiences with each other and find new networking opportunities for their businesses.
The program registered strong results within just a year of its launch, during which time VPBank lent $600 million to about 2,000 women entrepreneurs. This accounts for 25 percent of its total SME client roster. There were gains in other aspects of the business as well: for example, nearly 2,500 women opened saving accounts, valued at almost $180 million.
These outcomes have prompted IFC and WEOF to reach out to even more Vietnamese SMEs owned by women. Last year, following the partnership with VPBank, IFC and WEOF expanded funding for women-owned SMEs through a loan of $150 million to An Binh Commercial Joint Stock Bank.
Meeting the Needs of Women Entrepreneurs
As of May 2018, WEOF has invested more than $1.7 billion in financial institutions supporting women entrepreneurs in emerging markets, delivering much-needed capital to small businesses and far surpassing the facility’s original goals. It now has 19 advisory projects with a total value of $9 million.
Ngan, now operating a successful electronics shop, believes that the funding and support for women entrepreneurs is just the beginning. Once women start to “invest in business relationships and exchange ideas,” she says, the opportunities are limitless.
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Published in August 2018