Monday 28th August 2017
GBA recently welcomed our first member in Vietnam, Vietnam Prosperity Bank (VPBank). In 2013 the bank decided to ramp up its focus on SMEs, given that they contribute 40 percent of the Vietnamese economy. Its Women’s Market program – dedicated to women-owned or –led SMEs – is now in its pilot phase. In this interview, conducted the day of VPBank’s official listing on the Ho Chi Minh stock exchange on August 17, Kai Jin Fung, Head of the SME Banking Division, spoke with the Global Banking Alliance for Women about financial inclusion of women in Vietnam, the bank’s decision to join the Alliance, its hopes for its Women’s Market program and the role the bank plays in supporting women.
GBA: Why has VPBank made the strategic choice to dedicate itself to women-owned SMEs?
Kai Jin Fung: There were a couple of reasons. A large number of women in Vietnam are involved in business, so there’s a strong opportunity there. Secondly, there is a lot of responsibility placed on women in Vietnam, so they have a positive attitude about hard work and are very responsible. We’ve always believed that you shouldn’t worry too much about lending money to anyone who works hard to make an honest living.
Our mandate has always been to build VPBank into a leading SME Bank in Vietnam without specifically focusing on gender. In 2016 we had the opportunity to work with IFC, which raised our gender awareness, and as we got more data we saw that our observation about lending to women was backed up by numbers and success stories from other countries. We also talked to government bodies and associations, and found that while there are a high number of women in business in Vietnam, banks are not paying attention to them.
We thought this would be a good way to further differentiate ourselves. We put together a relationship-driven approach to SMEs, and we plan to take the same approach with the Women’s Market.
GBA: How do you segment the SME market?
Kai Jin Fung: We cover the market quite well. We define SMEs as legally constituted enterprises that are private limited companies, sole proprietorships or partnerships with annual turnover of up to US$20 million. Within that space, we sub-segment further into micro, up to US$1 million; small, US$1 million to US$5 million; and medium, US$5 million to US$20 million. Anything above that is served by our corporate banking and commercial banking areas.
Below that we have “informal” businesses, and we also have a business division serving them. These are unincorporated businesses that are operating under individual names, and there are about 4.5 million of them in Vietnam compared to only about 500,000 SMEs in Vietnam. Interestingly, we started this business nearly 2 years ago and have banked 70,000 to 80,000 informal businesses – about 80 percent are women.
Within SME we define the women’s segment using the IFC definition of ownership: 51 percent or more ownership by a woman or women, or 20 percent ownership, but decision makers like the CEO or CFO are women. We started doing this last September.
If you look at the IFC study that is about to be released, it’s estimated there are about 96,000 formal women-owned enterprises in Vietnam, and 42 percent of them are SMEs. We are happy to report that as of midyear we are banking 10,000 of them – so that’s about 25 percent of the share. We have given them loans of nearly US$300 million so far.
VPBank is only 24 years old, and our revenue has been growing from 30 percent to 40 percent annually for the past few years. Last year we grew 40 percent, and this year we expect to reach 50 percent. Our balance sheet growth has been 25 percent to 30 percent per year for the past 5 years.
GBA: Do you have a tag in your system for gender of business owner?
Kai Jin Fung: We do have a tag. Like every other bank, data was a challenge for us, though. To establish the baseline, we used a proxy. We asked 500 to 600 of our sales people how many of their clients were women-owned businesses by IFC’s definition, collected a sample, extrapolated, and that became our baseline. Since then, we have cleaned up our data, established the two parameters from IFC for defining women-owned/-led businesses, and put that into our system. We have an independent Business Intelligence Center that tracks this for us to ensure the numbers are correct. The Business Intelligence Center is responsible for all reporting throughout the bank.
GBA: Looking at women-led/women-owned SMEs in particular, can you give us an overview of the challenges they face in growing their businesses and what you’re doing to address them?
Kai Jin Fung: Women suffer from gender biases everywhere, but in Vietnam it can be particularly evident. The society is still very traditional, with a lot of family expectations placed on women. At the same time, they are perceived to be less financially savvy, and there is the sense that financial institutions need more resources to serve women entrepreneurs, who are largely small-scale business owners, and hence there is little commercial sense to investing in them.
In addition, one-third of women applicants have their loan rejected because of a lack of collateral, and most end up using a credit card and/or a personal loan, or their own personal means to finance their businesses.
Another big challenge they face is lack of knowledge. Through forums with women entrepreneurs and IFC, we found a lot of challenges women face in terms of not knowing how to navigate around government regulations, how to develop and present a business plan to get a loan, how to grow their businesses, how to manage costs, how to hire and retain people, etc. So we understood that offering financial solutions would not be adequate without a non-financial services proposition to fill the gap.
We had a growing women entrepreneur segment already, so our initial focus was how we could build out our non-financial offering for them. And this is not just good for women-owned SMEs, but for all SMEs. It also supports our value proposition to develop a long-term relationship with our clients. We feel very strongly about this because we feel like if we cannot answer the question of “Why VPBank,” then we don’t have a very strong model.
We’re focusing first on internal communication – why serving women entrepreneurs makes sense to VPBank and using NFS to build a unique value proposition. Then comes the execution of the value proposition and how we deliver it using three pillars: product, process and people. NFS fits in well with what we are doing to position VPBank as a supporter of the SME community. We organize a lot of forums and take part in a lot of face-to-face interactions with SME owners to engage with them on how they can use banking to grow their businesses, set up mentoring relationships, organize lecture series, etc., and lately we have been doing a lot more of these that are specific to women. We get a lot of feedback on the challenges they face, and we use that to form our NFS strategy.
GBA: The value proposition you are piloting to women includes an online one-stop shop where entrepreneurs can access information, network and sign up for seminars. Can you explain more about this?
Kai Jin Fung: This is still a work in progress. What we currently have is two channels. The first one is the traditional brick-and-mortar channel, and we have 69 business support centers co-located within our branches. We chose these locations based on concentration of SMEs. We have 600 Relationship Managers sitting in these locations.
Our second channel is our Direct Sales channel, which we began testing two years ago. We hired a team, gave them a simple product and just focused on selling. Seventy percent of SMEs in Vietnam have difficultly in accessing credit due to lack of collateral, so we introduced “unsecured” loans to tap into this under-served segment. We priced it at a level where it is cheaper for them to come to us than to go to the black market. This helped us to grow very fast and to acquire customers in a less costly fashion.
This Direct Sales channel has about 300 sales agents, making the total sales force serving SMEs about 900. We felt that this was good, but we were still relying on our people too much to help engage customers. This is a problem because staff attrition is anywhere from 15 percent to 30 percent as competitors attempt to copy our model by poaching our staff.
This was the idea behind the online platform – we are trying to build a community within the SME space that helps SME owners reduce the cost of doing business, retain staff, find mentors, improve business knowledge, etc. We’re also including a module that allows SME owners to post products so they can sell to each other and expand their markets within the platform. Another module we’re including is a hiring and recruitment portal. And we have business partnerships with tax consultants, SEO consultants, software consultants, accounting consultants, etc., that we can offer portal users access to on a trial basis.
We will also have a portal dedicated to women entrepreneurs where we will post articles that help improve business management, and we will think of doing webinars, getting experts to speak, conducting networking events, and providing information on insurance needs, savings plans for children, etc.
We have internally launched the digital road map, and the team continues to work on it. We have an aggressive timeline to develop the portal into an online community for VPBank to engage with customers and improve stickiness, while at the same time reinforcing our position as a supporter of SMEs in Vietnam.
GBA: Have you found women prefer online platforms?
Kai Jin Fung: We have heard from our women clients that demands on their time are very challenging, and they do like online platforms because they are convenient. Facebook is very commonly used here and has been a very important touch point.
This is still early days, and we have to figure out exactly why they might sign up for something like this, test it, measure it and be prepared to fail. If we fail, we will do so quickly and cheaply. We are going to build a lot of these digital components around the customer and using feedback from the customer to improve user experience. We have assembled a team of 100 people through our partners at Digital Lab who are working on the online portal, and they will be using experience gained from other digital customer journeys to execute this effectively.
GBA: Can you tell us more about the business centers you have co-located in some of your branches? How do they work?
Kai Jin Fung: We found that if we put a desk on the ground floor, the RM would have to answer a lot of unrelated questions – basic banking questions. Typically we give the business centers the floor above the retail floor, and have a setup of a lobby, waiting area, meeting room and workstations for sales people. They range from a 6-person to nearly 30-person unit size. Over the 5 years we’ve done this, we’ve learned that SME owners come into the bank for transactional banking services (cash withdrawal, remittances) and it’s far more effective for our RM to be out at the customer’s office to discuss banking opportunities. But if you can create a competitive advantage around service and around the people you employ that is very difficult to copy.
GBA: Have you had any challenges regarding staff buy-in for the Women’s Market program and if so, how are you overcoming them?
Kai Jin Fung: The good news about Vietnam is that because there are so many expectations of women, respect for women is also very high. Vietnam celebrates two women’s days — the international one and a local one. So women do have a special status in society, but they still have to overcome societal biases in doing business.
I would say that within the bank, getting the buy-in for serving women entrepreneurs is not a big problem. It’s more that we’re trying to do a lot of things within the bank, so there may be a small danger it could get drowned in a sea of projects. We’re doing a couple of things to combat this. One is to identify champions within the bank at senior levels who are women and can help to build the buy-in. Second, we are building business volume so that everyone can see the potential of this segment.
On the retail side we already have the numbers that show credit cards for the women’s segment are profitable. For the commercial SME card, the women entrepreneurs segment registered higher average spend and lower delinquency.
GBA: Why did you join the GBA?
Kai Jin Fung: Initially, we wanted to develop our program and get enough traction under the radar to avoid unnecessary distractions internally and externally. But after some encouragement from IFC, we saw a very compelling reason to become a GBA member in the ability to learn from the network. We want the Women’s Market program to be embedded into VPBank – not a single person’s project. Joining GBA will help us to fast track the program through experience sharing. Plus it will keep us accountable – by joining GBA, there is no backing out.
We are going to try to absorb as many good ideas as possible and also contribute to the development of the women entrepreneurs segment in Vietnam. We recognize the women entrepreneurs market is a good one for us to be involved in and can further differentiate VPBank in the SME space.