, LeapFrog Investments and DEG Invest in Vietnam’s HDBank to Help Accelerate Economic Recovery, Expand Small Business Lending and Build Banking Sector Resilience
The investment will increase access to credit, with a particular focus on women entrepreneurs
Hanoi, Vietnam, January 25, 2022-As Vietnam accelerates economic recovery amid COVID-19, IFC, LeapFrog Investments and DEG – Deutsche Investitions- und Entwicklungsgesellschaft invested $165 million in Tier 2 convertible bonds issued by Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank), a leading Vietnamese retail and SME bank. While strengthening the bank’s capital base, the financing will help increase lending to retail businesses and small and medium-sized enterprises (SMEs), including those owned or led by women.
While Vietnamese SMEs account for around 98% of all businesses, generate 40% of gross domestic product and 50% of jobs, they have limited access to finance, which hampers their growth. Additionally, given the economic challenges of a global pandemic over the past two years, small businesses in Vietnam urgently need additional working capital to maintain operations and recover from COVID-19.
In this context, HDBank aims to expand its retail and SME portfolio, reaching more rural populations and informal family businesses as well as women entrepreneurs. In response, IFC and its asset management company (AMC), LeapFrog Investments and DEG-the German Development Finance Institution subscribed $95 million, $60 million and $10 million, respectively, to the five-year plus one day U.S. dollar-denominated Tier 2 convertible bonds. Investors will have the option to convert the bonds into ordinary shares of HDBank during the mutually agreed period.
“The funds give us greater capacity to offer thousands of additional loans to retail, rural and smaller businesses, including women entrepreneurs, who need financing to get through the COVID-19 crisis and beyond” , said Pham Quoc Thanh, CEO of HDBank. . “The investments will help HDBank improve its capital position after meeting the Basel II capital security and risk management standards required by the State Bank of Vietnam, and at the same time realize its own growth strategy for become a leading SME and rural bank in the local market.”
In recent years, HDBank has focused on expanding lending to SMEs, particularly those in rural areas – this segment currently accounts for around half of the bank’s portfolio. With one of the largest rural networks among Vietnamese banks, it aims to significantly increase the number of its rural customers, mainly small agricultural and informal businesses.
The bond raising will also help HDBank strengthen its environmental and social (E&S) risk management capacity by introducing the IFC Performance Standards while improving the bank’s corporate governance policies in line with international best practices, including a commitment not to fund coal-related projects.
“Our investment not only enables HDBank to strengthen its capital base to seize growth opportunities and further expand its core SME lending business, but also sends a positive signal to bolster international investors’ confidence in the resilience of the Vietnam’s financial sector and the country’s prospects for continued growth, despite the impacts of an ongoing global pandemic,” said Kyle Kelhofer, IFC Country Director for Vietnam, Cambodia and Lao PDR.
“LeapFrog is proud to support HDBank in its mission to reach emerging consumers and entrepreneurs across Vietnam and provide them with the financial resources they need to thrive,” said Fernanda Lima, Partner at LeapFrog Investments. “Our team at LeapFrog Investments will work closely with HDBank to leverage our customer experience acceleration program to improve the bank’s digital tools, including banking apps, rewards programs and transfers. of money that are essential to expanding access to fair and reasonable credit products for emerging consumers in Vietnam.”
“DEG has already entered into a solid cooperation with HDBank with its first investment in 2020. DEG is leveraging its German and European business network by establishing a German office at HDBank and engaging its business support services in the areas of governance We are proud to be part of the bank’s successful development and look forward to accompanying and supporting HDBank further,” said Jochen Steinbuch, DEG Regional Director for the Greater Mekong.
IFC, a member of the World Bank Group, is the world’s largest development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise and influence to create markets and opportunities in developing countries. In fiscal year 2021, IFC committed a record $31.5 billion to private businesses and financial institutions in developing countries, leveraging the power of the private sector to end poverty. extreme poverty and boost shared prosperity as economies grapple with the effects of the COVID-19 pandemic. For more information, visit www.ifc.org.
About LeapFrog Investments
LeapFrog invests in exceptional companies in Africa and Asia, partnering with their leaders to achieve leaps in growth, profitability and impact. Founded in 2007, LeapFrog companies now reach 261 million people in 35 countries with health or financial services. LeapFrog beneficiary companies have also experienced an average growth of 26% per year since the time of the investment. They now provide jobs and livelihoods for 130,000 people. Inspired by LeapFrog’s Profit with Purpose strategy, LeapFrog has raised over US$2 billion from global institutional investors, including $500 million recently committed by Temasek to LeapFrog and future funds. LeapFrog was ranked by Fortune as one of the top five companies to change the world, alongside Apple and Novartis, the first private investment company ever listed. For more information about LeapFrog, please visit www.leapfroginvest.com.
For nearly 60 years, DEG, the German development finance institution, has been a reliable partner for private sector companies operating in developing and emerging countries. We offer our clients tailor-made solutions, including financing, promotional programs and advice tailored to individual needs. They can thus develop successfully and sustainably, while generating local added value and creating skilled jobs. With our portfolio of around €8.5 billion in around 80 countries, we are one of the largest private sector development financiers in the world. Learn more about www.deginvest.de.
About HD Bank
Ho Chi Minh City Development JSC Bank (HDBank), established in 1989 as a private commercial bank headquartered in Ho Chi Minh City, Vietnam, currently holds a 2% market share in terms of assets and deposits among Vietnamese banks. As of September 30, 2021, the Bank reported total consolidated assets of VND346 trillion ($15.1 billion), conducting its operations in Vietnam through its 308 branches and approximately 18,025 POS terminals in all the countries. Since 2018, the bank’s shares have been listed on the Ho Chi Minh City Stock Exchange (ticker: HDB), with major Vietnamese conglomerates Sovico Holdings being its largest shareholder accounting for 14.48% of its total share capital. HDBank recently supported Vietnam’s sustainability goals by becoming one of the country’s largest green financiers.