The International Finance Corporation, a member of the World Bank Group, will invest in the Vietnam Joint Stock Bank for Industry and Commerce or Vietinbank, according to the corporation.
The investment is still subject to approval by both parties and the corporation's Board of Executive Directors, according to the statement. However, on Sunday (Oct 10), both partners signed a memorandum of understanding on the investment.
Local newspapers said the corporation would spend US$190 million to acquire 10 percent of what used to be the second-largest state-owned financial institution in the country. The corporation plans to sink VND26,000 billion into the new venture by the end of the year.
An official from the corporation confirmed the acquisition agreement in the MOU and said both partners were negotiating the final details of the investment.
In return for the investment, the corporation will grant a long term loan to the bank which will improve access to finance for small and medium enterprises and support the equitization of the financial and banking sector in Vietnam.
The 10-year loan will amount to $110 million at LIBOR, plus 1.5 percent interest a year, according to the newspapers. LIBOR, or the interest rate at which banks can borrow funds within the English system, is fixed on a daily basis by the British Bankers' Association.
"By helping Vietinbank build up its capacity and strengthen its products and services, IFC will assist the bank in reaching more small and medium enterprises through its nationwide network," said Simon Andrews, the corporation's Regional Manager for Vietnam, Cambodia, Laos, and Thailand, in the statement.
The corporation will help the local bank, expand its SME loan portfolio, thus supporting job creation and private sector growth. Vietinbank plans to sell off another 15 percent of its shares later this year.