MAE to improve green credit flows

Lao Dong Newspaper organized a seminar titled "Improving the Effectiveness of Green Credit Flows as a Driver of Economic Growth” this week. Deputy Minister of Agriculture and Environment Dang Ngoc Diep attended the event, along with representatives from the Department of Environment under the Ministry of Agriculture and Environment, the Credit Department for Economic Sectors under the State Bank of Vietnam, the Private Economic Development Research Board (Board IV), credit institutions, and enterprises with an interest in green credit.

Scale has yet to match potential

Presenting an overview of the current state of green credit in Viet Nam, Ha Thu Giang, Director of the Credit Department for Economic Sectors, said that 82 credit institutions have so far extended green credit, with total outstanding loans exceeding 828 trillion VND (around 2.2 billion USD), a 4.6-fold increase compared to 2017. Green credit activity in Viet Nam has shown encouraging results in recent years, both in outstanding loan volume and in the number of participating credit institutions. The current green credit portfolio is concentrated primarily in two core areas: agriculture, forestry, aquaculture, and biodiversity conservation, which account for more than 32 percent, and green energy, which accounts for more than 30 percent. In practice, both banks and enterprises have strong demand for green capital flows, yet supply and demand remain poorly connected due to a range of persistent obstacles.

The most significant barrier, according to Ha Thu Giang, is an incomplete legal framework governing the criteria for identifying and classifying circular projects and the application of ESG standards, a gap that creates difficulties for both credit institutions and borrowers during appraisal and capital access processes. Compounding the problem is the pressure on banking system resources arising from the mismatch between credit disbursement and capital mobilization.

State support mechanisms also need to ensure transparency and clearly defined beneficiaries, with assistance modalities adapted to the actual conditions of each locality. Banks additionally face major obstacles in accessing sectoral planning data and information on enterprises' environmental compliance records, complicating credit risk management.

Despite impressive growth rates, green credit currently represents only around 4.2 to 4.5 percent of total outstanding loans across the economy, said Dr. Bui Thanh Minh, Deputy Director of the Private Economic Development Research Board. Notably, green credit remains concentrated in large-scale projects with well-defined business models and has yet to reach small and medium-sized enterprises in any meaningful way, a gap that significantly constrains the development of a comprehensive green transition ecosystem.

Citing the example of offshore aquaculture operations in Quang Ninh, Dr. Bui Thanh Minh noted that enterprises continue to stumble at the final stage of the loan application process: collateral. Credit institutions consider sea surface and marine space use rights insufficiently clear, and regard offshore aquaculture as highly exposed to natural disaster risks such as storms and flooding, making borrowers ineligible for loans under standard criteria. Meanwhile, international capital available through foreign funds carries interest rates of 16 to 18 percent, terms so unfavorable as to render borrowing by domestic enterprises virtually unworkable.

An intersectoral coordination mechanism for green finance is needed

Synchronizing policy mechanisms across ministries, agencies, and localities is the prerequisite solution for comprehensively resolving these bottlenecks. In the period ahead, the banking sector will continue to finalize and submit to the government a decree establishing a two-percent-per-annum interest rate support policy funded from the state budget for private sector enterprises and business households implementing green and circular projects, pending guidance from the Ministry of Agriculture and Environment. Specialized training programs in green finance and ESG governance for banking sector staff will also be expanded to strengthen appraisal capacity and risk management.

Nguyen Hong Quang, Deputy Director of the Department of Environment under the Ministry of Agriculture and Environment, said green credit and green finance represent emerging, cross-sectoral issues that carry their own distinct opportunities, risks, and challenges. Going forward, the Ministry of Agriculture and Environment will continue to review and refine the legal framework for environmental protection.

The ministry has also called on the State Bank of Viet Nam, the Ministry of Finance, and other relevant ministries and agencies to research, develop, and submit specific roadmaps for green credit implementation to the competent authority for approval. It has further urged these bodies to guide credit institutions and foreign bank branches operating in Viet Nam to integrate environmental eligibility criteria and green taxonomy classification verification into their credit extension and credit management processes.

Nguyen Hong Quang argued that an intersectoral coordination mechanism for green credit and green finance must be established, bringing together all relevant stakeholders. Within such a mechanism, the regulatory bodies overseeing credit, bonds, and finance should serve as the nucleus, working in close and effective coordination with environmental agencies, specialized sector bodies, and local authorities across policy formulation, implementation, monitoring, evaluation, and recommendations to competent authorities.

From the perspective of a credit institution, Nguyen Quang Ngoc, Deputy Head of the Credit Policy Division at Agribank, said lenders need to work alongside regulators and the business community by mobilizing capital for green credit and expanding the scale of medium- and long-term funding to meet the economy's needs. Agribank called on the government and the State Bank to expedite the completion of supporting mechanisms and policies for green credit, including appropriate interest rate policies. According to Nguyen Quang Ngoc, such measures would help create more favorable conditions for enterprises to access capital while spreading the momentum for green credit development throughout the banking system.

$1 = VND 26,456 - Source: Vietcombank.