Green credit – an important financial source of economy

Permanent Vice Governor of the State Bank of Vietnam (SBV) Dao Minh Tu has stated that green credit is an important financial source of the economy.

Since 2015, the SBV has issued a number of documents guiding banking activities in eco-friendly fields.

According to the SBV’s Credit Department for Economic Sectors, the total green outstanding debts surged from over 71 trillion VND (3 billion USD) in late 2015 to over 340 trillion VND in late 2020. As of the late October, the whole economy’s credit had reached nearly 9.99 quadrillion VND, resulting in a hike in green credit, mostly in the field of green agriculture and renewable energy.

A representative from the Vietnam Maritime Commercial Bank (MSB) said the lender will continue gearing credit into eco-friendly projects, considering it a driver of growth in terms of asset, revenue and profit this year.

Despite the COVID-19 pandemic this year, foreign direct capital still poured into green projects. Recently, Proparco - the Development Finance Institution of France - provided a 50 million USD loan for HDBank to serve green projects while the International Finance Corporation (IFC) offered 100 million USD loan to the Orient Commercial Bank (OCB) in a bid to help the private sector contribute more to green and sustainable development in Vietnam.

However, the ratio of green credit remains modest, mostly in large-scale banks as renewable energy projects have long payback period, high capital and market risks,

A study showed that each country needs to create a legal corridor for green credit activities to effectively perform relevant policies.

SBV Governor Nguyen Thi Hong said the SBV will continue perfecting the legal framework with specific standards on green credit and list of sectors in green field, thus making it easier for credit organisations to evaluate and monitor projects in need of green credit./.