How do you evaluate the development of green credit in Vietnam?
- Green credit in Vietnam is becoming an important trend, playing a role in promoting sustainable development and transforming the economy towards green growth and reducing carbon emissions. In recent years, Vietnam has made significant efforts in perfecting the mechanism and legal framework for determining areas and projects granted green credit, criteria for evaluating green projects, forms of granting green credit, creating a basis for developing capital and disbursing green credit.
The State Bank of Vietnam (SBV) has issued many legal documents, guidelines and policies to promote green credit. The SBV has implemented many solutions to create capital for green credit, such as encouraging credit institutions to issue green bonds, supporting credit institutions to access capital from international institutions, etc.
However, besides the achieved results, green credit still accounts for only a small proportion of total credit and the potential has not been fully exploited. The implementation still faces many challenges in terms of legal framework, awareness and appraisal capacity, causing the green credit development rate to not be commensurate with the national strategic target on green growth for the period 2021-2030, vision 2050.
Currently, a large part of the credit growth space is put into green credit development. However, green credit still faces many difficulties. What are those difficulties and barriers, sir?
- First, there is currently no truly complete legal framework for this field. The criteria and categories of green projects have not yet been unified according to the economic sub-sector system, which makes it difficult for credit institutions (CIs) to determine lenders. Specialized guidelines on green fields are still quite limited, causing many difficulties in practical implementation.
Second, the capacity to assess green credit is still limited. Many credit institutions and banks are still lacking a team of employees with enough expertise to assess the risks and effectiveness of green projects, especially in new fields such as renewable energy.
Another difficulty lies in capital sources and investment costs. Green projects often require large capital sources and long payback times, while the capital sources of credit institutions are mainly short-term, causing challenges in financial balance. Green credit lending interest rates are fluctuating from 5-8% for the short term and 9-12% for the medium and long term. This interest rate is still considered quite high, reducing the attractiveness of businesses.
On the part of businesses and people, awareness and sense of environmental protection are sometimes still not adequate. Businesses often focus on short-term profits while ignoring environmental impacts.
Risk and project management are also factors to consider. Green-cap loans are often small in scale and may lack management experience, increasing the risk of project failure. The monitoring and environmental impact assessment of these projects is also quite complicated, causing banks to be somewhat hesitant when deciding to invest.
Finally, the market and information about green credit are still limited. The secondary market for green loans is not yet developed, we also lack effective communication channels and information about green credit.
What should Vietnam do to remove obstacles and develop strong green credit? Especially effectively accessing and exploiting green FDI sources?
- To solve this problem, in my opinion, we need to deploy a series of synchronous solutions in many aspects.
For green credit development, first of all, perfecting the legal framework is extremely important. We need to soon issue a list of national green projects with specific and clear criteria, as a solid basis for credit institutions to identify lenders. At the same time, it is necessary to specify preferential policies, such as reducing lending interest rates or simplifying administrative procedures, to increase the attractiveness of green credit to businesses.
Second, it is necessary to focus on improving the capacity and awareness of green credit for bank officials, businesses and people.
Third, the issue of mobilizing and balancing capital sources also needs special attention. Developing the green bond market and other green financial instruments will help mobilize long-term capital for green projects. Encourage the participation of international financial institutions and green investment funds to increase capital for domestic credit institutions.
For effective access and exploitation of green FDI capital, Vietnam needs to strengthen green FDI attraction policies in a proactive and competitive manner to strongly attract green FDI capital.
Strengthening international cooperation also plays an important role in attracting green FDI. Taking advantage of free trade agreements, such as EVFTA, to meet EU green standards and attract FDI capital to renewable energy and circular economy sectors is very necessary.
Finally, connecting domestic enterprises and FDI enterprises needs to be focused on to create a spread of technology and green management experience.
Thank you!
