In the trend of development, green credit was an inevitable direction of the global financial industry playing an important role in promoting sustainable development as well as realising a green growth strategy of Vietnam.
Green credits are funded in chains
Five years ago, green credit was a relatively new concept for the Vietnamese economy. Then as society developed, people’s life and enterprise production activities were increasingly affected harming the environment, the idea of ‘green credit’ was genuinely concerned. That was a necessary step in the context of climate change taking place globally, especially when Vietnam was considered as one of the countries with the highest level of pollution today.
Banks were not on the sidelines in greening credit lines. In particular, HCM City Development Joint Stock Commercial Bank (HDBank), Nam A Commercial Joint Stock Bank (Nam A Bank), Orient Commercial Joint Stock Bank (OCB), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Bank for Agriculture and Rural Development (Agribank) had step by step to boost credit in clean and green areas. Primarily, HDBank aimed to sustainably green growth by supporting businesses to participate in domestic and global value chains.
HDBank leaders said, over the years, the bank implemented many closed-chain financing solutions from distributors, agents to suppliers, suppliers of many reputable businesses and distribution channels, including domestic and foreign distribution (auxiliary industry chain for Samsung/LG, livestock chain CP/CJ; Yanmar agricultural machine chain; supply of farming materials and fertiliser for DPM/DCM; petroleum chain PLX/PVOIL; supermarket chain SGCoop/VIN, and so on.)
In addition to meeting the general regulations on credit extension of HDBank, if customers meet the criteria and join the chain-linked with HDBank (currently over 30 chains and expected to reach over 40 chains by the end of the year), they will be financed by HDBank to fulfill orders without necessary collaterals.
The chain sponsorship had been HDBank’s trademark product line in the market. Customers enjoyed attractive incentives on interest rates lower than one percent to two percent per year compared to regular customers, exemptions and concessions for services in the chain’s ecosystem. In particular, in many chains, the rate of funding for collaterals which were real estate was up to 100 percent, goods were circulated or borrowed without guarantees. Sponsorship and payment transactions were carried out on a digital basis, speeding up the processing, automaticity, no need to go to banks and limiting paperwork.
Customers also rated HDBank as the pioneer bank to carry out solar power financing programme in the market. Products were standardised, could be deployed massively, especially roof voltage. Get the solar power system formed from the loan as collateral. Establish links with a wide range of suppliers, design, installation, inspection, and maintenance companies to offer customers quality choices and peace of mind when investing.
Accordingly, HDBank also implemented a financing package for clean energy projectssolar power projects with a total capital of up to 7 trillion dong, serving grid-connected solar power projects under Vietnamese electricity development planning. However, projects must meet green criteria like reducing energy consumption, reducing CO2 emissions, reducing environmental pollution; projecting investment license or representation plan, planning suitable for loan purposes and green growth goals.
HDBank did not accept funding for businesses operating in smoke and dust pollution industries. Also, to be financed by HDBank to invest in the project, the minimum equity participation rate in the project was at least 30 percent of the total investment.
HDBank’s strategy of “greening” credit lines
Not only having the limit mentioned above at 7 trillion dong, but HDBank also vigorously implemented the solar power credit programme with the scale of up to 10 trillion dong, expected to increase to 16 trillion dong in 2020 depending on the change of market. As of August 2019, HDBank funded 9.803 trillion dong (debit balance of 5.775 trillion) for solar power businesses in Vietnam with the project scale of 725 MWp.
This green credit programme once again affirmed HDBank’s orientation in becoming a green bank, showed by moves like understanding, providing customers with the best financial solutions, at the same time towards sustainable values; helping promote the development of renewable energy; reducing electricity consumption; reducing environmental pollution, with each MWp reduced emissions by up to 25,000 tonnes of CO2; ensuring local and national energy security; global integration.
For investors, HDBank financed up to 70 percent of the total investment. The loan term was up to 12 years. Diversified collaterals included assets and revenues formed from loan capital.
With solar power on the roof, businesses investing projects to use or rent could enjoy preferential loans at HDBank at the rate of 70 percent and a five-year term. The main guarantee was the rooftop solar power system with the funding up to 10 billion dong. Also, HDBank supported associate partners specialising in installation, construction, maintenance, and warranty of the system.
HDBank met the ‘green’ criteria to link, receive preferential long-term capital for this field from foreign financial institutions to sponsor solar power projects in Vietnam. In the coming years, HDBank was expected to continue to maintain high growth momentum by exploiting the exclusive customer ecosystem with more than 30 million customers of HDBank, HDSaison Finance Limited Company and Vietjet Aviation Joint Stock Company.
Besides, HDBank also vigorously implemented closed-chain financing packages from distributor sponsorships to suppliers of nearly 30 supply chains. Not only engaged and helped Vietnamese businesses sustainably develop the global chain, contributed to orienting Vietnamese enterprises in the green trend of the world, reduced emissions to the environment, met strict production criteria from big-name distributors around the globe, HDBank also optimised the supply chain which would help businesses save on business costs, improved the quality of products and services provided to customers, and indirectly improved the competitive advantage of Vietnamese companies in the domestic and international markets.
According to the five priority areas of the State Bank of Vietnam, as of August 2019, HDBank had increased its loan balance to 11.012 trillion, 3.4 times higher than 2016, having an increase of 38 percent over the same period in 2018, three times higher than the general credit growth rate of 13 percent of HDBank. In particular, HDBank prioritised funding for high-tech agriculture, typically sponsoring 800 billion dong for the Truong Hai Auto Corporation-Hoang Anh Gia Lai Agricultural Joint Stock Company fruit growing-processing-exporting chain, with prospects for 2020 expected to increase 1.800 trillion.
HDBank primarily directed credit in agriculture and rural areas. The Bank regularly conducted rural agriculture workshops in all communes of districts, provinces and cities with HDBank and HDSaison headquarters. That was considered an innovative way of HDBank in helping farmers and agricultural cooperatives directly access information of products and services of the Bank, from which to choose a suitable loan product. Thereby, HDBank and HDSaison contributed significantly to pushing back shadow banking in the countryside.
