Vietnam: Fund for Pro-Poor Businesses Debuts

Thursday, November 12, 2009

The Vietnam Challenge Fund (VCF), a new financial instrument to support new business projects that directly benefit the poor was launched Tuesday in Hanoi.

With an initial budget of US$3 million for 2009-2011, the fund is a major component of the “Making Markets Work Better for the Poor Phase 2” initiative.

It is backed by the Ministry of Planning and Investment, the U.K.’s Department for International Development (DFID) and the Asian Development Bank (ADB), The Saigon Times Daily reported.

VCF is designed to challenge the private sector in Vietnam to propose innovative new business models that benefit the poor, according to ADB.

It will initially focus on agro-processing linkages with the poor, but will expand to other areas such as infrastructure services, if the initial implementation experience is positive.

The fund will consider projects within a funding range of $30,000 to $250,000 and the grant can account for 49 percent of total investment capital.

“Challenge fund first originated in the U.K. but has since been implemented by DFID and others across a number of regions worldwide and has proven to be an efficient development tool,” DFID head Fiona Lappin said.

“In Vietnam, VCF will help absorb some of the business risks associated with innovative projects that aim to increase employment and income for the poor,” she said.

“In emerging countries, such as Vietnam, markets particularly in rural areas often do not function efficiently or fairly, limiting the opportunities for the poor to participate in and benefit from the growth process,” Ayumi Konishi, ADB country director for Vietnam, said.

The new approach will help the poor access the market and benefit from it, rather than provide them with direct public support, he added.

Nguyen The Phuong, deputy minister of Planning and Investment, said the ministry was working with ADB and DFID to fulfill its goals of private sector development and poverty alleviation.

It is estimated about 12 million out of the country’s total population of 86 million are living in poverty. About 90 percent of them are residents in rural areas.

Source: Saigon Times Daily (link opens in a new window)