Vietnam Third Rural Finance Project

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The objective of the Third Rural Finance Project for Vietnam will be to increase economic benefits to rural private enterprises and households by increasing their access to finance. The expected outcomes will include: (i) improved access to financial services for rural entrepreneurs; (ii) increased capital investment made by the rural entrepreneurs as well as increased employment; (iii) increased lending, particularly term lending to the rural private sector for capital investment by all participating financial institutions (PFIs) on market-based terms. There are three components to the project. The first component is the increase capital investment by rural enterprises - rural development fund. This component, the Rural Development Fund (RDF), is designed to address the term financing constraints of financial institutions to provide funding to rural enterprises for longer-term investment needs. The goal is to enable rural private entrepreneurs to access medium to long-term financing for capital investments, such as equipment and new technologies, which will enable opportunities for efficiency gains and business expansion. The second component is the increase access to microfinance in the rural economy - micro-finance loan fund. This component, the Micro-finance Loan Fund (MLF), will provide a small line of credit to demonstrate the commercial viability of lending to micro-enterprises and household businesses. These may be defined as formal and informal businesses employing 2-3 employees outside of their immediate families. Finally, the third component is the build institutional capacities and new products. The institutional building component is a core element to the success of the RFIII project. This component is designed to help strengthening the financial institutions participating in the project and demonstrating a credible strategy for expanding access to finance in rural areas of Vietnam. This component is also designed to help demonstrate that new markets can be found and that these can be commercially viable. These new markets can come in the form of new customers, new products and services, and new institutions participating in the project.