Vietnam is one of the fastest growing economies in Southeast Asia with a thriving entrepreneurial ecosystem. Vietnam’s GDP has grown at a rate of 5-7% over the past 5 years aided by an uptick in entrepreneurial activity across sectors. A range of factors have supported this uptick including a policy push from the government to promote innovation-driven entrepreneurship, a rapidly growing middle class driving up demand, increasing interest from domestic/foreign technology- sector investors, and the availability of business support-providers.
In line with economic growth, Vietnam has achieved impressive progress towards the Sustainable Development Goals (SDGs). Vietnam is ranked 49th globally with respect to performance on SDGs in 2020 and this represents a significant improvement from the 88th position when they were first included in the ranking in 2016. According to the Ministry of Planning and Investment, Vietnam requires approximately USD 108 billion for pursuing SDGs related to five sectors: education, healthcare, transportation, rural area development, and power/water supply. Of this, the Ministry suggested that the Government would be able to contribute only USD 75.8 billion.4 Given these constraints, Vietnam is aiming at increasing private sector participation to mobilize additional financing for investments into the country’s development.
Increasingly, impact investing is being viewed as a critical practice to support entrepreneurial initiatives that are focused on SDGs; the practice, however, is at an early stage in Vietnam. The Global Impact Investing Network estimates that the market size for impact investing is around USD 715 billion globally. With respect to Vietnam, impact capital has been deployed for more than a decade, however, it lags its regional peers in terms of momentum gained. Since 2012, Vietnam has attracted about USD 1.6 billion of impact capital. However, about 98% of this capital has been deployed by seven large Development Financial Institutions (DFIs). Private Impact Investors (PII) have cumulatively invested just over USD 28 million in 29 deals in Vietnam. In contrast, PIIs have deployed over USD 234 million across 105 deals in Indonesia, and over USD 184.6 million in the Philippines across 66 deals. These numbers are substantially higher in comparison to Vietnam, both in terms of capital deployed and numbers of deals closed. Such data suggests that there are likely to be several gaps in the impact investing ecosystem of Vietnam which when addressed can strengthen the practice.
This research examines the gaps across five broad components of the impact investing ecosystem and provides recommendations to strengthen the same.