Banks are cautious, businesses are struggling: Green credit 'bottleneck'?

Hard to reach businesses

In the context of the global economy moving towards sustainable development, green credit is becoming an important trend, helping businesses reduce capital costs and access preferential financial resources. However, the implementation of green credit in Vietnam still faces many barriers, requiring close cooperation between banks and businesses.

According to data from the State Bank of Vietnam, as of September 30, 2024, 50 credit institutions had generated green credit balances with a total outstanding balance of over VND 665,000 billion, an increase of 7.11% compared to the end of 2023, accounting for over 4.5% of the total outstanding balance of the entire economy. These green credits are mainly focused on renewable energy, clean energy (accounting for over 43%) and green agriculture (over 30%).

Despite the growth, the current proportion of green credit is still low compared to the set target. Specifically, the total outstanding green credit currently accounts for only 4.5% of the total outstanding debt of the economy, far from the target of 10% by 2025.

In fact, many businesses in the fields of renewable energy, waste treatment, and clean technology have difficulty accessing green capital due to strict loan conditions. Mr. Le Quang Thang, Chairman of the Board of Directors of Viet Long Investment and Construction Joint Stock Company, said: “Access to preferential loans from green credit funds still faces many barriers. We hope to have specific policies to help businesses easily access long-term loans with low interest rates, while simplifying approval procedures.”

Ngân hàng thận trọng, doanh nghiệp chật vật: ‘Nghẽn’ tín dụng xanh?

Unleashing green credit capital contributes to "greening" investment capital flows

Not only is it difficult to access capital, this business also believes that the process of valuing collateral assets is not suitable for the green business model. "Waste treatment plants or clean energy projects need a more flexible asset valuation policy, instead of applying traditional criteria such as real estate or machinery," Mr. Thang suggested.

Creating a favorable mechanism for green credit

Faced with the urgent need for green credit, commercial banks are promoting policies to support businesses in the direction of sustainable development. Mr. Tran Manh Hung, Director of Vietcombank Hai Phong emphasized: “Vietcombank is committed to providing preferential capital for green businesses, helping them reduce financial costs and expand operations. We are also reviewing loan conditions to better suit the green business model.”

Similarly, VietinBank also proposed to have separate regulations on risk coefficients for green credit, in order to reduce financial pressure on businesses. Mr. Le Duy Hai, Deputy General Director of VietinBank, said: “We hope that the State Bank will have a policy to reduce the risk coefficient for green credit loans, helping businesses access capital more easily at reasonable costs.”

From the operator's perspective, Mr. Nguyen Xuan Bac, Deputy Director of the Department of Credit for Economic Sectors (State Bank) - said that the State Bank has issued Circular 17 guiding the implementation of environmental risk management in credit granting activities of credit institutions, to guide credit institutions to carefully consider environmental risk factors when granting credit.

Mr. Bac also proposed increasing access to preferential capital from international financial institutions for green investment projects, which have high costs and long payback periods. Credit institutions should actively participate in these projects to contribute to sustainable economic development.

In order to promote green credit, Ms. Nguyen Linh Phuong, Deputy Director of the Monetary Policy Department (State Bank), affirmed: “The State Bank always encourages credit institutions to expand lending to green projects. We are also studying mechanisms to reduce interest rates and support businesses to access capital from international green credit funds.”

According to Ms. Phuong, from 2024, the State Bank has required banks to reduce operating costs to reduce lending interest rates, including in the green credit sector.

With the commitment from banks and the support from the State Bank, green credit is gradually becoming an important driving force for sustainable economic development. However, to optimize efficiency, businesses expect the banking industry to continue expanding access to green credit, simplifying lending conditions. At the same time, reducing interest rates and providing financial support, helping green businesses maintain long-term operations. Improving collateral valuation policies, in line with the characteristics of green business.

On the contrary, banks also need stronger incentive mechanisms from the State Bank, ensuring that green credit is not just a commitment, but actually becomes a driving force for a sustainable economy.

The Ministry of Agriculture and Environment said that it has just submitted to the Prime Minister a draft Decision on environmental criteria and confirmation of investment projects granted green credit and issued green bonds. The decision, when issued, will help promote green finance, support sustainable development projects and mobilize capital for environmental protection.

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