"Green credit would also improve people's living standards and protect the environment". — VNA/VNS Photo Do Binh

HA NOI (Biz Hub) — The State Bank of Viet Nam (SBV) issued a rule that would push up green credit and environmental risk management in the credit-granting process so it could implement the National Action Plan on Green Growth.

Experts and commercial banks said SBV's decision helped create a level playing field for green credit growth. Green banking is controlled by the same authorities as regular banking, but takes more care to assure its actions benefit the country's environment, society and natural resources.

In a recent seminar on green credit and banking, Nguyen Thi Kim Thanh, head of SBV's Banking Strategy Institute, said the banking sector had contributed to the country's socio-economic development by playing the role of financial broker and promoting growth.

Therefore, green credit policies could lead the economy to green growth, Thanh said. Green credit would also improve people's living standards and protect the environment, she added.

"Green banking and credit are used in many countries at the moment," Thanh told the Thoi Bao Kinh Te (Economic Times) newspaper. "However, it is still new in Viet Nam. So its effects are still modest, and it hasn't yet expanded throughout the sector."

Nguyen Tri Hieu, a banking expert, said green credit could help banks fulfill their obligations to society, in addition to boosting profit.

So far, though, Vietnamese banks haven't shown much interest in the trend. Hieu said most of them have been preoccupied struggling with debt. Many don't see how the issue of the environment is related to their businesses.

An expert from the International Financial Corporation (IFC) suggested Vietnamese commercial banks consider environment and society an indispensable part of their risk management structures. Besides, banks should develop green credit to give their businesses an edge and a new growth tool.

The experts also advised that commercial banks reform their investment portfolios by systematically assessing investment risks and credit evaluation processes. This would help financial institutions and banks reduce bad loans and increase their financial stability, they said.

More incentives

According to an official from the Ministry of Planning and Investment, Viet Nam needs about US$30 billion to implement its 2020 green growth plan, 30 per cent of which from the State budget. The rest would be mobilised from the private economic sector.

At present, climate change and green growth account for more than 10 per cent of the Government's budget.

Banks play a very important role in reaching green growth targets, the official said, as private enterprises must mobilise capital from banks when investing in green growth projects.

To effectively assist green growth, banks should offer enterprises special credits, because green growth projects take more time to bring in profit than others do.

Hieu suggested banks offer incentives such as relocating loans with lower interest or tax priority.

Meanwhile, Nguyen Duc Viet, deputy director of the Risk Management Section of ABBank, said his bank was interested in comprehensive, sustainable development.

So far, the bank had completed a system of social and environment risk management, which is integrated into the bank's current risk management, Duc said.

To create a level playing field for all banks, Duc asked management agencies to issue more policies supporting sustainable growth. — VNS