At the Vietnam Business Forum (VBF) in mid-2019, Aymar De Liedekerke Beaufort, Head of the Bank Working Group (BWG), BNP Paribas Vietnam general director, said many banks voluntarily stopped funding for the activities that polluted the environment and damaged wild animals.
“Hopefully Vietnamese banks under the support of the government will have similarly restrictive actions because of sustainable financing, the core factor in the banking strategy,” said Beaufort.
It is not difficult to understand, because the State Bank of Vietnam (SBV) statistics show that only about 24 percent of green projects are developed by credit institutions. In particular, they are mainly done at a number of head offices and branches of banks such as Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Bank for Agriculture and Rural Development (Agribank), Saigon Hanoi Commercial Joint Stock Bank (SHB), VietNam Asia Commercial Joint Stock Bank (Viet A Bank), Vietnam Public Joint-stock Commercial Bank (PVcomBank) and HSBC. Besides, only 26 percent of the banks build and deploy the process of managing environmental and social risk in credit operations such as HSBC and Standard Chartered. Techcombank and VietinBank have built and promulgated environmental and social risk management process.
However, there are also good news when green credit outstanding loans are constantly increasing. Specifically, if the first quarter of 2018 green credit balance was at 188.27 trillion dong, by the end of 2018 it increased to over 250 trillion dong. In particular, one of the important contents in Decision No. 1604/ QD-NHNN approving the Green Banking Development Project in Vietnam, issued by SBV on August 7, 2018, is to limit and reduce loans for activities that are harmful to the environment.
“Vietnam’s financial and banking sector with green growth, anti-climate change and sustainable development has recently made important progress, with orientation, policy signals and appropriate guidance from the SBV. The efforts have been recognised by the international community such as in the recent National Progress Report of the Sustainable Banking Network and the International Finance Organisation (IFC), Vietnam has been ranked at the stage four, a very advanced level,” Michael Krakowski, director and chief advisor of GIZ’s Macroeconomic Reform Programme said.
However, the road ahead is still quite long for green and finance and banking to become a strong trend in Vietnam. In order to effectively contribute to the achievement of sustainable development goals and the green economy, banks will need to have strategies in line with these goals and establish similar policies, principles and tools application to support.
According to Krakowski, the direction of sustainable banking system development in Vietnam is not only consistent with the government’s strategies of sustainable development, green growth and climate change, but also in line with the position of the industrial revolution 4.0 and support Vietnam’s comprehensive financial strategy. For the banking sector, this implies accelerating the digitalisation of banking operations and services, including digital banking, electronic banking and FinTech.
Mark Gillin, representative of AmCham shared, although optimistic about the government’s efforts to facilitate the cashless economy and digital field development, AmCham was concerned about some recent regulations on payment and FinTech.
The fast-growing plan to apply foreign ownership limits in payment and FinTech sectors would significantly limit Vietnamese FinTech startups in raising capital from foreign investment organisations, thereby limiting their ability to attract talent and making them less competitive than other businesses in the region.
“In general, such limits will hinder the development of the industry and we hope that the government will maintain policies that enable FinTech services to have the opportunity to contribute to public technology innovation and financial universalisation in Vietnam,” said Gillin.
