Professional Documents
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Future of Asia
Small and medium enterprises (SMEs) and micro-SMEs1 (MSMEs) form the
backbone of many economies around the world.
By Sameer Kumar
Works with financial institutions across Asia on large-scale transformations, strategy, digital
banking, and credit risk and provides expertise on banking for small and medium-size enterprises
and risk management in emerging markets
By Abhishek Agrawal
Associate partner at the firm’s Hanoi office
By Mehul Patel
Expert at the firm’s Hanoi office
April 27, 2022 ‑ Small and medium enterprises (SMEs) and micro-SMEs1
(MSMEs) form the backbone of many economies around the world. This is
particularly true in Vietnam, where they account for nearly 70 percent of GDP
and 80 percent of the country’s employment in 2020.
While banks in Vietnam have focused on serving SMEs, no bank has emerged
as a clear winner due to gaps in the traditional banking business model for
the segment.
The first gap for many banks is their proposition, which is anchored
primarily on secured lending – typically big-ticket, collateralized loans.
There are limited offerings to address specific needs of several SME
clusters e.g., small-ticket unsecured loans, liabilities-focused propositions,
export-import related solutions.
Third, most banks have yet to offer a seamless digital O2O (online-to-
offline, offline-to-online) process for customer onboarding and servicing of
SME customers.
The MSME segment presents an additional challenge in that not many banks
in Vietnam are adequately addressing the needs of the segment, where they
face high operational and risk costs. MSMEs thus represent a “white space”
market – constrained by supply, with the opportunity to create additional
VND 500 trillion in loan balances through 1-2 million new loan recipients,
according to McKinsey analysis.
Given the potential value at stake, banks seeking to gain a competitive edge
in Vietnam’s SME and MSME segments could consider five key imperatives.
https://www.mckinsey.com/featured-insights/future-of-asia/countries-and-regions/southeast-asia/southeast-asia-perspectives/unlocking-value-in-vietna… 2/7
7/11/23, 3:04 PM Unlocking value in Vietnam’s banking market for SMEs and MSMEs
https://www.mckinsey.com/featured-insights/future-of-asia/countries-and-regions/southeast-asia/southeast-asia-perspectives/unlocking-value-in-vietna… 3/7
7/11/23, 3:04 PM Unlocking value in Vietnam’s banking market for SMEs and MSMEs
credit process. Banks can test out such offerings by starting with small credit
limits, within their risk appetite, and later rapidly expanding to good-credit
SME and MSME customers.
The SME and MSME segments in Vietnam are vibrant and poised for future
growth. Banks have the opportunity to earn a greater share, especially in the
MSME white space, if they choose to reinvent themselves through more
personalized offerings, digital and analytics, and streamlined processes.
1 The micro-SME segment in Vietnam is defined by annual turnover of less than VND 20 billion, and
Asian insurance
McKinsey’s 2023 Asia Insurance eXecutive Officer Roundtable shed light on the
underutilization of AI in Asian insurance and unpacked what it would take to fully
harness AI’s potential.
https://www.mckinsey.com/featured-insights/future-of-asia/countries-and-regions/southeast-asia/southeast-asia-perspectives/unlocking-value-in-vietna… 4/7