Fund tweaks to help SME innovation

At a forum on the topic in Hanoi last week, Vo Tri Thanh, director of the Institute of Brand and Competitiveness Strategy, said that innovation, digital transformation, and green transition must be taken more seriously in Vietnam.

“Numerous Vietnamese businesses proactively follow up the trend and carry out digital and green transformation successfully,” Thanh said. “However, this is also a revolution in institutions and policies, and we are struggling with a lot of issues. Therefore, we should soldier on, as we cannot wait for institutions to be perfected.”

Although innovation brings many opportunities, not all businesses can grasp them. It is well documented that the vast majority of Vietnamese businesses are small- and medium-sized enterprises (SMEs) with poor potential, and so investing in tech and innovation can be next to impossible.

Supporting some businesses to overcome the most enduring challenges, Phan Thanh Ha, director of the SME Development Fund under the Ministry of Planning and Investment (MPI), said that the fund is supporting some of those smaller companies. The support is carried out in forms like direct lending, indirect lending, capital sponsorship, and capacity building support.

“The fund’s lending interest rate is 80 per cent of the lowest commercial lending interest rate, which is determined based on four state-owned commercial banks,” Ha said. “This is one of the best preferential interest rates among all credit institutions.”

On June 10, amendments to Decree No.39/2019/ND-CP from 2019 on operation of the SME development fund took effect to provide more specific and reasonable terms in making loans. “This is expected to speed up the disbursement of the fund, and contribute to removing difficulties and supporting businesses in implementing digital transformation and innovation,” Ha declared.

Policy and related approaches are major issues for businesses in digital transformation and innovation. Due to not accessing state policies to support businesses in this area, businesses are losing out on development opportunities.

At BuyMed, which is a startup operating the e-commerce site Thuocsi.vn, it has been distributing pharmaceuticals directly through a business-to-business model, providing medical products and other healthcare solutions to patients.

Director Vuong Dinh Vu stated that there is a difference between the reality of innovation and digital transformation, as well as expectations about its effectiveness.

“Struggling with market barriers, poor performance, fragmented pharmaceutical distribution systems, and other risks, BuyMed has utilised innovation in the pharma distribution industry, and provided digital platforms and technical infrastructure to completely solve these problems,” Vu said. “This includes revamping product packaging towards circularity, and monitoring the shipping process in a stricter fashion.”

Utilising a just-in-time model aiming at zero inventory, no waiting times, and no costs incurred is also of great help. “This innovation has made a positive impact on 30,000 pharmacies and clinics, saving 75 per cent of time, 80 per cent of working capital, half of transportation costs, and profits increasing by 20 per cent,” Vu highlighted.

Trinh Thi Huong, deputy director general of the Agency for Enterprise Development under the MPI, said that in 2024, the total budget allocated to support SMEs is $5.7 million. More than 8,000 businesses are expected to be trained both face-to-face and online, consulting and supporting the application of digital transformation solutions.

“In 2023, we saw strong growth, with digital transformation readiness scores in all sectors exceeding the average and increasing,” Huong said. “Enterprises in various industries and fields have been integrating digital transformation goals into their company development strategies, and are ready for the next steps. However, many are still not ready for digital transformation and are not fully aware of the role of innovation.”

In 2023, Vietnam’s Global Innovation Index ranking was 46th among 132 countries and territories, up two places on-year, including the improvement of both inputs (institutions, human resources, research, and infrastructure) and outputs (knowledge, products, and creativity).

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