Untangling the 'bottleneck' in the credit market

In the context of unpredictable global and regional economic fluctuations, the credit market continues to play a particularly important role, serving both as the primary source of capital for the economy and as a strategic regulatory tool in macroeconomic policy management.

On December 24th, in Hanoi, the Institute for Brand and Competition Strategy, in collaboration with relevant units, organized the forum "Credit Market and Macroeconomic Issues," aiming to create a space for in-depth exchange where policymakers, economic and financial experts, credit institutions, businesses, and investors could share perspectives, experiences, and discuss key issues of the credit market in the current period.

Overview of the Forum "Credit Markets and Macroeconomic Issues," held on December 24th in Hanoi . (Source: Organizing Committee)

Credit is increasing, but businesses still have difficulty accessing capital.

Speaking at the Forum, Dr. Vo Tri Thanh, Director of the Institute for Brand Strategy and Competition, affirmed that, in the context of unpredictable fluctuations in the global and regional economies, the credit market continues to play a particularly important role, serving as both the main channel for supplying capital to the economy and a strategic regulatory tool in managing macroeconomic policies.

Vietnam is aiming for high growth in the coming years, but growth needs to be not only rapid but also sustainable, green, and inclusive. To realize this goal, the most important foundation remains maintaining macroeconomic stability, including controlling inflation, ensuring the safety of the financial and banking system, balancing the macroeconomy, and strengthening market confidence.

Recent years have shown that credit has played a crucial role in the recovery and promotion of economic growth. However, along with these positive contributions, the expansion of credit also poses many challenges related to the efficiency of capital allocation, the capacity of businesses to absorb capital, as well as the need to control risks and maintain the stability of the financial system in the context of significant adjustments in monetary policy.

Dr. Can Van Luc believes that Vietnam is facing an urgent need to transform its growth model. (Source: Ministry of Finance)

According to Dr. Can Van Luc, a member of the Prime Minister's Policy Advisory Council, the total credit volume in the economy has now reached over 17 million billion VND, while the rate of capital mobilization is slower, making the pressure to balance capital increasingly evident. This limits the room for further reductions in lending interest rates, especially for medium and long-term loans – vital sources of capital for businesses during the recovery phase.

Market realities reveal a paradox: credit is increasing, but businesses still struggle to access capital. Banks want to lend, but cannot lower credit standards as risks are growing. Capital flows primarily to businesses with strong finances and high collateral, while small and medium-sized enterprises (SMEs) and innovative businesses – the sectors most in need of capital – face numerous obstacles.

Dr. Can Van Luc argues that Vietnam is facing an urgent need to transform its growth model. The new model requires a simultaneous combination of investment, capital injection, and innovation, rather than the sequential approach of the past, in order to achieve rapid, sustainable, and inclusive growth. Dr. Luc also emphasized that there is insufficient scientific basis to assert that credit must double GDP; more importantly, the quality of growth is determined by the structure of credit and investment.

Currently, about 80% of public investment is allocated to transportation infrastructure, while healthcare and education account for 15% and science and technology only about 0.5%. This shows that growth still relies heavily on scaling up, while productivity and innovation drivers remain weak – the biggest bottleneck to long-term growth.

Conversely, the banking system is also under significant pressure from the unbalanced structure of the capital market. Currently, more than 50% of the economy's capital still depends on bank credit, while the corporate bond and securities markets have not fully recovered in terms of capital mobilization. The burden of medium- and long-term capital continues to fall on banks, increasing systemic risk if credit is accelerated too quickly.

It is evident that Vietnam possesses great potential in mobilizing financial resources. However, this process still faces many bottlenecks and obstacles related to imbalances (over 50% of capital comes from the banking sector); institutions, procedures, markets, products, investment channels, and risk management... Therefore, a comprehensive strategy for mobilizing, allocating, and utilizing financial resources is needed, linked to increasing labor productivity, improving investment efficiency, and enhancing the quality of growth. Reforming the financial market sector is urgent.

Dr. Le Xuan Sang, Deputy Director of the Vietnam and World Economics Institute, proposed several directions, including: regarding capital sources, it is necessary to continue diversifying bank credit sources by promoting the stock market, especially bonds, and focusing on developing credit rating/creditworthiness organizations; sanitizing the stock market through strict control of excessively high informal leverage; controlling securities fintech; considering more effective management of proprietary trading activities of securities companies; increasing the supply and demand of affordable housing through a mechanism of credit incentives (based on US experience); fully issuing regulations related to the management of green credit by commercial banks (credit granting standards, risk assessment); and improving the system for forecasting and warning of credit risks to ensure the effectiveness of other mobilization and investment channels.

Green credit highlights

Another highlight at the forum was green credit – a pillar of sustainable growth in the future. According to Mr. Nguyen Quoc Hung, Vice Chairman and General Secretary of the Vietnam Banking Association, outstanding green credit currently stands at approximately 750,000 billion to less than 1 trillion VND, growing at an average rate of about 21% per year, but still accounts for a very small proportion of the total outstanding credit in the entire economy. Meanwhile, the goal of net-zero emissions by 2050 requires a very large amount of capital for transformation.

Mr. Nguyen Quoc Hung, Vice Chairman and General Secretary of the Vietnam Banking Association, believes that although green credit outstanding has grown rapidly, it still accounts for a very small percentage of the total outstanding credit in the entire economy. (Source: Ministry of Finance)

Mr. Hung also pointed out that the biggest bottleneck in green credit today is the unstable legal and policy framework: ESG criteria are not yet unified, and the mechanisms for renewable energy and clean technology projects still have many shortcomings, making both banks and businesses hesitant to implement long-term investments.

Based on that experience, experts agree that in the coming period, credit management must shift its focus from speed to quality, from expanding scale to improving the efficiency of capital allocation, and from pursuing short-term growth to building a foundation for sustainable growth.

At the Forum, delegates also focused on clarifying the relationship between credit policy management and macroeconomic stability, analyzing the role of credit in promoting growth, supporting the private sector and priority areas; and discussing the impact of interest rate policies, adjustments in credit mechanisms, and potential risks to the banking system and financial markets in the context of rapid credit growth.

Through updating policy trends and sharing best practices, the Forum aims to support businesses in reviewing their capital strategies, improving financial management capabilities, and enhancing access to appropriate credit resources.

Source: https://baoquocte.vn/go-nut-that-cho-thi-truong-tin-dung-339165.html