Green transformation is an opportunity, a need: Promoting green credit flows

Along with the green transformation roadmap of the economy, banks have identified promoting green credit as one of the top goals in their long-term strategy.

According to experts' calculations, to meet the capital source for environmental projects and achieve the goal of zero net emissions by 2050, Vietnam needs long-term funding of up to 368 billion USD. In which, the banking industry plays the role of financial intermediary, providing capital for the green economy .

International Capital Mobilization

The Bank for Investment and Development of Vietnam ( BIDV ) is implementing a VND10,000 billion credit package to finance "green construction" projects. This preferential interest rate credit package is applied to enterprises borrowing capital to invest in new projects or expand and renovate existing projects into green projects. Previously, BIDV also implemented a VND4,200 billion green credit package to support textile and garment enterprises in green transformation, towards sustainable development.

Renewable energy is an industry that contributes greatly to the green transformation of the economy, and also has a huge demand for green credit capital. Photo: HOAI DUONG

According to BIDV, by the end of the first quarter of 2024, the bank's green credit balance reached VND73,394 billion - accounting for 4% of total credit balance, with 2,069 projects and business plans of 1,698 customers. "Not only is BIDV one of the largest green credit providers in the market today, it has also successfully mobilized VND5,000 billion in green deposits - a resource for emission reduction and environmental protection projects. With the green deposit product, the bank commits to using all of it to finance green projects such as renewable energy, clean energy and green buildings" - said a BIDV representative.

Southeast Asia Commercial Bank ( SeABank ) has also just mobilized nearly 850 million USD from the world's leading financial institutions such as the International Finance Corporation (IFC), the US International Development Finance Corporation (DFC), the Asian Infrastructure Investment Bank (AIIB)... for environmental projects requiring large, long-term capital.

Ms. Le Thu Thuy, Vice Chairwoman of SeABank’s Board of Directors, said that the bank strives to connect the public and private sectors to create transparent and attractive opportunities for the market, thereby promoting investments in Vietnam’s blue economy. This will help businesses, especially small and medium-sized enterprises, have enough capital to develop and expand activities related to green projects.

Vietnam Prosperity Bank (VPBank) and Japan Bank for International Cooperation (JBIC) have also signed a credit contract worth up to 150 million USD to finance renewable energy and power transmission projects in Vietnam. The above unsecured loan is within the framework of the AZEC concept - Asia Zero Emission Community initiated by the Japanese Government, in an effort to be carbon neutral and achieve economic growth appropriate to each country's circumstances.

According to the State Bank of Vietnam, by mid-2024, 50 credit institutions had generated a total outstanding green credit balance of VND650,300 billion, up 4.71% compared to the end of last year and accounting for 4.5% of the total outstanding debt of the economy. Green credit is mainly concentrated in clean energy (nearly 45%) and green agriculture (nearly 30%).

Green capital is still modest

In fact, Vietnam does not have a general regulation on green classification list in accordance with economic sector classification and international practice. This list will help credit institutions have a basis for specific assessment of each project when appraising loans to focus and prioritize reasonable capital allocation.

Economist - Dr. Tran Du Lich informed that since 2015, Vietnam has started implementing the process of using green credit. At that time, the State Bank and the International Monetary Fund (IMF) issued a handbook for 15 industries on the application of green credit development. However, up to now, the proportion of green credit is still quite small in the total outstanding credit, despite the relatively high growth rate.

To improve the situation, according to experts, there needs to be coordination between the Government, banks and businesses to raise awareness, create a favorable environment and diversify green credit products.

According to Mr. Pham Hong Hai, General Director of Orient Commercial Bank (OCB), one of the main reasons why the scale of green credit in Vietnam remains modest is because businesses, especially small and medium-sized enterprises, have difficulty accessing green capital.

"Many businesses do not really understand the concept of green credit and its benefits. Information about green credit products, criteria and loan procedures are often not widely disseminated, so it is difficult for businesses to find reliable and complete information related to the conditions and requirements for green projects. The green loan process is also more complicated than traditional loans, requiring many appraisal steps and necessary documents," Mr. Hai pointed out.

Meanwhile, green projects are often considered to be high-risk, making it difficult to assess the effectiveness of loans both socially and financially. Therefore, banks must lend with stricter conditions, such as higher interest rates, corresponding to the risk level of the project. "To unblock the green credit flow, it is proposed that the State Bank consider offering incentives and appropriate rewards to banks that actively provide green loans to motivate the implementation of green products, such as providing loan guarantees for renewable energy projects," Mr. Hai proposed.

Mr. Tran Hoai Phuong, Director of Corporate Banking at Ho Chi Minh City Development Bank (HDBank), shared that the bank is fortunate to have access to and capital from many foreign financial institutions. These institutions want businesses to develop in a green direction, but to borrow capital, businesses must proactively make green transformations and must present the green model they are pursuing.

(*) See Lao Dong Newspaper from issue dated October 31

Many green commitments

The State Bank of Vietnam said that the Asian Development Bank (ADB) has committed to lending, aid and technical assistance for green and sustainable projects and programs in Vietnam with a total commitment value of more than 11.6 billion USD.

The World Bank has also provided financial resources of up to 18.7 billion USD to Vietnam, including non-refundable aid, credit capital and preferential loans, through 123 green and sustainable projects.

Source: https://nld.com.vn/chuyen-doi-xanh-la-co-hoi-nhu-cau-thuc-day-dong-von-tin-dung-xanh-196241101205802493.htm