Small and Medium Enterprise Development Fund – A Capital Raising Channel for Start-ups in Vietnam
Under Vietnamese law, small and medium enterprises (“SMEs”) which include micro-enterprise, small enterprise and medium-sized enterprise are treated favourably. On 10 May 2019, the Government of Vietnam promulgated Decree 39/2019/ND-CP (“Decree 39”) to provide regulations on the organisation and operation of small and medium enterprise development fund (the “Fund”). Decree 39 came into effect on 1 July 2019.
The key highlights of Decree 39 are as follows:
- the Fund is to create funding sources available to support and develop SMEs, especially innovative start-ups as well as promote effectiveness in management of state capital used for supporting SMEs.
- the Fund provides loans directly or through commercial banks to eligible SMEs and provides non-recourse fund to partially finance construction of facilities and purchase of machinery and equipment for use in production and business plans or projects of SMEs.
- the maximum loan shall not exceed 80% of total investment capital of a project. The total of the loans provided to an SME shall not exceed 15% of the actual charter capital of the Fund.
- the lending tenure shall not exceed seven years.
- the interest rate of loans provided to SMEs shall be equal to 80% of the lowest commercial loan interest rate.
If you have any questions or require any additional information, you may contact Truc Truong of ZICO Law Vietnam.
This alert is for general information only and is not a substitute for legal advice.