Moreover, the credit policy through credit orientation focuses on production and business sectors, making an important contribution to supporting and promoting economic growth.Secondly,
INTRODUCTION
Credit has come to play an increasingly important role, both as an instrument in the financial planning of households and as an asset on the balance sheet of financial institutions. Especially in the banking industry, the lending policy of the Central Bank has now been effective in operating monetary policy to achieve macroeconomic objects Furthermore, the lending policy has a positive impact on the markets such as financial, real estate, labor and commodity markets
First of all, the credit policy promotes and develops the commodity market Specifically, the regulations on deposit interest rates are helpful for enterprises to increase business manufacturing, but achieve monetary policy aims With thematic credit programs for a number of sectors that are the driving force of economic growth along with appropriate mechanisms and policies in each period has made an important contribution in supporting businesses, supporting sectors of the economy to overcome difficulties, maintain, recover and grow, especially during Covid-19 pandemic Moreover, the credit policy through credit orientation focuses on production and business sectors, making an important contribution to supporting and promoting economic growth.
Secondly, lending policy contributes to ensuring sustainable growth of the financial and real estate market, promoting the role of bank credit capital, which is essentially to meet the short-term capital needs of the economy Accordingly, the adjustment of credit policies of the Central Bank in order to concentrate capital for production and business is appropriate, not only promoting the role and efficiency of bank credit sources, but also meeting the requirements of economic growth recovery after pandemic, which in the medium and long term also makes an important contribution to the financial market and real estate market to grow and develop sustainably.
Thirdly, lending policies create conditions for the labor market to develop by meeting the capital needs of the economy At the same time, through the policy credit program, job creation loans; student loans have created jobs and created jobs, generating income for policy beneficiaries That not only contributes to ensuring social security but also creates conditions for the labor market to develop sustainably across regions and sectors of the economy.
According to the above importance and growth of lending policy in Vietnam, we will provide an overview of lending policy in this presentation.
OVERVIEW OF LENDING POLICIES
Types of loans
According to Circular 39, a credit institution shall consider granting a decision to offer a loan to a customer which is divided into the following categories:
Short-term loan, defined as loans having the maximum loan term of 1 year.
Medium-term loan, defined as loans having the loan term between above 01 year and
Long-term loan, defined as loans having a loan term of more than 05 years. b By loan methods
By methods, loan is divided into the following categories:
1 One-shot loan: The credit institution and its customer implement lending procedures and conclude a loan agreement each time when a loan is needed.
2 Syndicated loan: At least two credit institutions are together offering a loan to a customer for the purpose of implementing one fund borrowing plan or project.
3 Loan for crop season interval: The credit institution extends a loan to a customer in order to cultivate or raise seasonal plants or livestock used in the next production cycle within a given year, or plants of which roots are retained and industrial crops which are annually harvested Accordingly, the credit institution and its customer shall agree that the outstanding amount of debt existing in the previous production cycle can be used for the following production cycle, but shall not be allowed to exceed the time length of 02 consecutive production cycles
4 Line of credit loan: The credit institution determines and agrees with its customer on the maximum outstanding amount of debt maintained during a specified time period Within a credit line, the credit institution will extend a one-shot loan At least once a year, the credit institution will consider redefining the maximum outstanding amount of debt and duration of maintenance thereof.
5 Provisional line of credit loan: The credit institution undertakes that fund is available to be lent to the customer and the amount of that fund is restricted to the agreed amount of provisional credit The credit institution and its customer shall agree on the effective period of provisional line of credit which is not allowed to exceed 01 years.
6 Current account overdraft facility: The credit institution approves an overdraft limit within which the customer is allowed to spend more money than the amount available in the current account in order to render payment services on that current account The overdraft limit is maintained within the maximum period of 01 years.
7 Revolving loan: The credit institution and its customer agree to extend a loan to meet the demand for fund used in the business cycle which is less than 01 month and the customer is allowed to use the outstanding amount of principal incurred in the previous business cycle for the following one provided that the loan term remains fewer than 03 months
8 Rollover loan: The credit institution and its customer agree on a short-term loan under the following conditions: a) On the payment due date, the customer is entitled to repay debt or extend the period of repayment of part or whole of the outstanding amount of loan principal for another specified time period; b) Total loan term is not allowed to exceed 12 months from the initial disbursement date and one business cycle; c) On the date when a loan application is considered, the customer does not incur any bad debt owed to credit institutions; d) In the process of a rollover loan, the customer owing any bad debt to credit institutions shall not be given any extension of the agreed period of repayment.
Interest rates
A credit institution and its customer shall agree on the interest rate depending on capital demands and supplies on the market, loan demands and creditworthiness of customers
A credit institution and customer shall agree on the interest rate on short-term loan denominated in Vietnamese dong but shall not allow it to exceed the maximum interest rate decided by the State Bank’s Governor over periods of time in order to meet certain demands for borrowed fund as follows:
Loans taken out to support the agricultural and rural development sector under regulations of the Government on credit policies for agricultural and urban development; Loans taken out to implement the export business plan in accordance with the Law on Commerce and other instructional directives thereof;
Loans taken out to finance business activities of small and medium-sized enterprises under the Government’s regulations on support for development of small and medium-sized enterprises;
Loans taken out to develop ancillary industries under the Government’s regulations on development of ancillary industries;
Loans taken out to finance business operations of high technology application enterprises under the provisions of the Law on High Technology and other instructional directives thereof
If a customer fails to repay or fully repay the agreed amount of loan principal and/or interest at the payment due date, the customer shall be obliged to repay loan interest as prescribed hereunder:
The amount of interest on principal is charged at the agreed interest rate in proportion to the period during which repayment of that principal due has not been made;
If a customer fails to make due payment of interest as prescribed by Point a of this Clause, that customer must pay late payment interest charged at the interest rate agreed upon between the credit institution and customer which is not allowed to exceed 10%/year interest rate on the outstanding balance of late payment interest in proportion to the period of late payment;
Where a debt has become delinquent, the customer owing a delinquent debt must pay interest on the outstanding amount of principal which is overdue in proportion to the period of late payment for which the interest rate charged is not allowed to exceed 150% of the interest rate charged on due repayment that is determined upon the date of such debt becoming delinquent.
Condition of loans
A credit institution shall consider granting a decision to offer a loan to a customer who meets the following requirements:
If that customer is a legal person, it must have civil capacity in accordance with the civil law jurisdictions If that customer is a natural person, (s)he must be aged exactly 18 years or older and have full capacity for civil conduct in accordance with the civil law jurisdictions, or must be aged between exactly 15 and nearly 18 years and must not have his/her incapacity or restricted capacity for civil conduct as provided by laws
Demonstrate that customer’s demands for a loan to be used for legally accepted purposes
Establish that customer’s plan for effective use of borrowed funds
Prove the customer’s sound financial capability to repay debt owed
Where that customer obtains a loan from a credit institution on which the interest rate is prescribed by Clause 2 Article 13 in Circular 39 hereof, it shall be rated transparent and healthy in its financial status by a credit institution.
The role of the State Bank of Vietnam
To measure macroeconomic stability, people often refer to short-term fluctuations of macroeconomic variables such as GDP, inflation, balance of payments deficit, budget deficit. Therefore, 2 solutions that the State Bank implements are (1) Controlling and keeping inflation low and stable (2) Stabilizing the money market, the foreign exchange market.; Ensuring the safety of banking operations
For a market economy to develop sustainably, the banking system must always ensure safe, healthy operations and maintain legal discipline in the banking sector The State Bank enforces safety regulations for the operation of the banking system, including lending policies Especially:
Minimum capital adequacy ratio to ensure the ability to cover unforeseen losses with own capital
Debt service coverage ratio to ensure the bank has enough liquidity when risks arise from the imbalance in terms of term, source of capital and use of capital
Limit credit extension to a customer and related persons to limit risks caused by credit concentration
Limit capital contribution and share purchase to ensure that the bank does not expand its operations into non-financial sectors.
Regulations on classification of debts, setting up of risk provisions to assess the quality of “Credit”, supplemented with management and reasonable adjustment of investment portfolio structure; ensure adequate provision of financial resources to cover losses, determine the financial capacity and soundness of credit institutions.
The impact of recent changes in regulation
With recent regulations, credit growth of 8.15% in 2022 compared to the end of 2021 and an increase of 17.09% over the same period in 2021, consistent with more positive developments of the economy As a result, it has contributed to strongly activating economic activities, creating momentum for the recovery of macro indicators, thereby helping the economy gradually recover and grow.
The State Bank has implemented many preferential credit programs, subsidized interest rates, contributing to the implementation of the general economic recovery program, the banking industry continues to implement drastic solutions to remove difficulties for people and businesses affected by the COVID-19 epidemic, ensuring to meet the demand for credit capital for production and business Moreover, circulars amend and supplement: reduce lending interest rates for customers; loan program to pay wages to stop working and pay wages to restore production; solutions on exemption and reduction of payment service fees…According to the results of exploitation in the central reporting system of the StateBank, by the end of April 2022:
Accumulated debt value that has been structured since the issuance of Circular 01/2020/TT-NHNN is more than 695,000 billion VND for over 1.1 million customers. The outstanding balance of the debt group remains unchanged at more than 198,000 billion VND of nearly 680,000 customers
The accumulated value of debt that has been exempted, reduced interest and fees, and kept the same debt group is nearly VND 91,000 billion for nearly 490,000 customers The outstanding balance of interest exemption and reduction remained the same at nearly VND 18,000 billion for more than 166,000 customers.
E-commerce transactions in the first 4 months of 2022 achieved a high growth compared to the same period in 2021 In which, commercial transactions increased by 69.7% in quantity and 27.5% in value; via the Internet increased by 48.39% and 32.76% respectively; via mobile phones increased by 97.65% and 86.68%; via QR code increased by 56.52% and 111.62%
The total number of activated e-wallets increased by 10.37% compared to the end of 2021.
In 2017, the credit grew high and the quality was improved Specifically, credit growth continued to maintain a high growth rate, maintaining a stable growth rate for three consecutive years, from 2015 Specifically, credit growth credit reached 18.17%, approximately the growth rate of 2016 (18.71%), although not yet reaching the target set by the Government, credit quality has been gradually improved, credit structure has been improved allocation focuses on priority areas, especially agricultural production and high technology For 5 groups of industries and priority fields, loans to support SMEs accounted for the highest proportion, reaching 98,442 billion VND (accounting for 64.4% of total outstanding loans); agricultural - rural credit increased by 22.1% compared to the end of 2016; credit for high-tech enterprises increased by 20%
Besides, capital mobilization continues to increase Deposits from economic organizations and individuals continue to maintain a high growth rate, with an estimated increase of 19% compared to 2016 Mobilization through the issuance of valuable papers also increased strongly, estimated to increase by 38% Deposits by VND continue to account for a large proportion of total mobilized capital, with nearly 90.5% of total mobilized capital, partly due to the attractive interest rates compared to 0% interest rates if deposited in USD. Credit structure is becoming more and more reasonable The proportion of short-term credit tends to increase, while medium- and long-term credit decreases to 53.7% of total credit, down 1.4 percentage points compared to the end 2016, reflecting the current situation of capital mobilization in Vietnam (short-term deposits account for a higher proportion than medium and long-term capital) Credit structure by currency was maintained stable, in which credit in VND accounted for 91.6% In addition, in 2017 the market structure has shifted towards reducing dependence on credit sources from credit institutions, increasing the role of the capital market, representing a rational capital mobilization structure shift , in accordance with the law of production and business development of enterprises The proportion of capital supply to the economy from the capital market reached 35.4% at the end of 2017, an increase of nearly 15 percentage points compared to 2012, while the proportion of capital supply to the economy from the credit institution system decreased to 64.6% from 78.4%.
The liquidity of the banking system is abundant and stable thanks to the reasonable management of monetary policy through the intervention of the State Bank (the SBV has bought a large amount of foreign currency and has a net money supply of nearly 124 trillion dong since the beginning of the year) The system's average credit/deposit ratio increased from 85.6% in 2016 to 87.3% in 2017.
Interest rates continued to decline, supporting production and business development. IInterbank interest rates in 2017 reached the lowest level in the past 5 years (average overnight interbank interest rates in 2017 were about 2-3%) Besides, deposit and lending interest rates continued to remain stable (As of the end of 2017, VND deposit interest rates were common at 0.8 - 1%/year for demand deposits) term and term less than 1 month; 4.5 - 5.4%/year for term deposits from 1 month to less than 6 months; 5.4 - 6.5%/year for term deposits term from 6 months to less than 12 months; term over 12 months is at 6.4 - 7.2%/year Popular lending interest rates for priority sectors are at 6 - 6.5%/year for short- term, at 9 - 10%/year for medium and long-term loans Loan interest rates for normal production and business sectors are at 6.8 - 9%/year for short-term; 9 ,3 - 11%/year for medium and long term).
Moreover, bad debt handling has been accelerated Legal difficulties encountered in the bad debt settlement process have been gradually removed through the promulgation of Resolution 42/2017/QH14 of the National Assembly on piloting bad debt settlement of NPLs. credit institutions Credit institutions, foreign bank branches, bad debt trading and settlement organizations have been given the right to seize security assets, and a financial handling mechanism for credit institutions when selling bad debts has been created The implementation of Resolution 42 initially achieved positive results when the whole system handled about VND 70,000 billion of bad debts in 2017, an increase of 40% compared to
2016, bringing the bad debt ratio The balance sheet of the credit institution system decreased to 2.3% from 2.46% at the end of 2016 The bad debt ratio decreased mainly due to potential bad debts in restructuring debt, corporate bonds and other loans external receivables that are difficult to collect decrease.
In addition, the exchange rate was stable The USD/VND exchange rate remained stable throughout 2017 in the context of constantly fluctuating international markets As of the end of December 2017, the central exchange rate is estimated to increase by 1.5-1.7% compared to the beginning of the year, although more than the increase of 1.23% in 2016, but still much lower compared with an exchange rate adjustment of 5% in 2015, when the central exchange rate mechanism was not applied Meanwhile, the commercial bank rate decreased by about0.2%, the free market rate decreased by about 1.5% compared to the beginning of the year.
ANALYZE THE EFFECTIVENESS OF LENDING POLICIES IN
Impact of lending policy on the economy
Ratio of short-term capital for medium and long-term loans
Ratio of outstanding loans to total deposits
Table 1: Statistics on some basic indicators (to October 31, 2022)
Source: Account balance report, October 2022 statistical report of credit institutions, foreign bank branches (Excluding microfinance institutions)
Looking at the data table, we can see that the ratio of outstanding loans to total deposits(75.82%) is nearly 3 times higher than the ratio of short-term loans to medium-term and long- term loans (25.71%) according to the entire system system system The ratio of outstanding loans to total deposits accounted for the highest proportion was state-owned commercial banks (82.04%), followed by Joint Stock Commercial Banks accounting for 77.31% As for the ratio of short-term funds used for medium and long-term loans, the most important ratio is finance and leasing companies (40.59%) but finance and leasing companies do not have outstanding loans for loans on total deposits The State Commercial Joint Stock Bank and theJoint Stock Commercial Bank accounted for nearly the same proportion (28.86% and28.46%) For 2 billion loans to total deposits and the ratio of short-term capital for medium and long-term loans, it can be seen that the State Commercial Joint Stock Banks and JointStock Commercial Banks always account for a high proportion and have an important position in the banking sector banking system.
Figure 1: Growth of monetary indicators in the period 2015-2019
Looking at the graph, it can be seen that the total means of payment, capital mobilization and credit for the economy have increased and decreased unevenly from 2015 to
2019 As for the total means of payment, capital mobilization approximately the same percentage and from 2015 to 2016, the total means of payment and capital mobilization increased, but in 2017 and 2018 it decreased, but in 2019 it increased again Credit to the economy increased from 2015 to 2017 but in 2018 and 2019 it tended to decrease.
Figure 2: Scale of consumer loans in the period 2012-2020
From the graph, it can be seen that the scale of consumer lending from 2012 to 2020 tends to increase over the years This may reflect the growth of the financial sector and the increase in consumer loan demand Most commercial banks and financial companies lend to consumers, but commercial banks account for a higher proportion.
Lending policies can have a significant impact on economic growth and financial stability in Vietnam In recent years, Vietnam's government and central bank have implemented various lending policies to support the country's economic development Here's an analysis of the effectiveness of these policies:
Enable businesses and individuals to access capital for business development and growth: This provision can boost economic activity and increase the percentage of GDP growth In addition, lending policies can help enhance financial stability by aiding the distribution of financial risk.
Increase output and improve product quality: Signal policies support production and development enterprises, facilitate access to capital and resources to improve product quality and increase productivity and reduce product costs In addition, it also contributes to the restoration of traditional industries, capital support for workers and production and business establishments to expand production.
Job creation: Signal policy has created a large number of jobs for people, especially in rural and mountainous areas This helps to reduce the unemployment rate, increase people's income and improve the quality of life.
Increase investment: Signal policy to support investors in developing business projects, especially large projects, Encourage investment and economic development. Financial sector development: Signaling policy has also played an important role in developing Vietnam's financial sector, increasing lending and saving electricity, helping to boost economic activity and growth cellular economy.
Limiting risks: reducing demand for informal application signal services, limiting usury, “black credit”, cleaning and stabilizing financial markets.
Lending policy of banks in Vietnam
Loans can play an important role in supporting economic growth and financial stability. Therefore, lending policies are divided into many different types to suit and meet the needs of borrowers with many different purposes This is one of the stepping stones, supporting capital for individuals, households and businesses to realize their legitimate loan purposes. For instance, if the loans are provided for productive purposes such as investment in infrastructure, education, and innovation, they can boost economic growth in the long run On the other hand, if loans are given for consumption or speculative purposes, they may lead to instability and increase the risk of defaults. b Interest rate policy
The State Bank of Vietnam (SBV) has been using its interest rate policy to encourage lending and investment The SBV has lowered interest rates to stimulate demand and promote economic growth Lower interest rates can also reduce the cost of borrowing, making it easier for businesses and individuals to access credit However, lowering interest rates too much can lead to inflation and currency depreciation, which can undermine financial stability. c Credit allocation policy
The Vietnamese government has implemented policies to encourage banks to lend to priority sectors such as agriculture, rural development, and small and medium-sized enterprises (SMEs) This policy aims to promote inclusive growth and reduce income inequality However, the effectiveness of this policy depends on how effectively the government and the banking sector can identify and support priority sectors. d Credit guarantee policy
The Vietnamese government has also implemented credit guarantee policies to supportSMEs, which often face difficulties accessing credit due to their limited collateral and credit history Credit guarantee policies can help reduce the credit risk for lenders, making it easier for SMEs to access credit However, the effectiveness of credit guarantee policies depends on the quality of the guarantee mechanism and the government's ability to manage credit risks.Overall, lending policies can play a critical role in supporting economic growth and financial stability in Vietnam However, the effectiveness of these policies depends on various factors, including the quality of the policy design and implementation, the ability of the government and the banking sector to identify and support priority sectors, and the quality of the guarantee mechanism In addition, the paper discerns the determinants of probability of default across lender types Default risk of formal credit appears to be strongly affected by formal loan contract terms, e.g., loan interest rate and form of loan repayment, whereas default risk on informal loans is significantly related to the presence of propinquity and other internal characteristics of the borrowing household Because of asymmetric information problems, a financial intermediary is faced with two types of information problem One is the hidden information problem and the other is the hidden action problem The first type of problem is often referred to as an adverse selection problem, while the second type is better known as a moral hazard problem An adverse selection problem appears when the borrower holds private information before the loan contract is signed Adverse selection thus refers to a situation where a characteristic of the borrower is imperfectly observed by the financial intermediary The financial intermediary must attempt to screen the different pieces of information the borrower has before a loan contract is signed and a loan is offered.
Credit policy is an important part of a country's monetary policy, affecting its economic development In Vietnam, credit policy has played an important role in promoting economic development.
The impact of lending policies on different segments of society
Lending policies can affect different segments of society in different ways, depending on the nature of the policy and the characteristics of each group.
3.3.1 Small and Medium Enterprises (SMEs)
The lending policy of banks in Vietnam can affect SMEs as follows:
Enhancing access to capital: Lending policies can help SMEs access capital for business development and new investments This helps to increase the sales and profits of businesses In addition, the policies also help SMEs enhance competitiveness, create new products and services, expand consumption markets and develop business Increase the ability to cope with financial risks, protect SMEs from the negative effects of financial crisis or business difficulties However, if the bank has a difficult lending policy or strict review process, SMEs may have difficulty in accessing capital.
Reducing financial burden: The low-interest loan policy also helps to reduce the financial burden on SMEs, helping them improve cash flow and invest in improving product/service quality or expanding markets school If the bank has a low interest rate policy, SMEs can save capital costs and increase debt repayment capacity Conversely, if interest rates are too high, SMEs may find it difficult to repay loans and maintain business operations.
Lending time: The lending period of banks in Vietnam can also affect SMEs If the loan period is too short, SMEs may find it difficult to repay their loans and create financial pressure Conversely, if the loan period is too long, SMEs may have difficulty in managing and optimizing capital.
Lending conditions, and application review process: flexible lending conditions will also help SMEs meet their financial needs and develop business operations more efficiently However, the SMEs may also face difficulties in carrying out loan application approval procedures at banks, especially when demonstrating the ability to repay loans and the feasibility of the project Processing time can also be long, causing SMEs to wait and face difficulties in cash flow management.
In summary, bank lending can have a positive or negative impact on SMEs To take advantage of the benefits of borrowing money from a bank, SMEs need to carefully study the requirements and conditions of the bank and find ways to meet these requirements to increase their chances of getting a loan and growing their business In addition, lending policies of banks in Vietnam also need to be properly designed, in order to create favorable conditions for SMEs to access and use capital in the most effective way.
Lending policies can have a positive effect on low-income borrowers by:
Financial Assistance: Financial institutions may offer financial assistance programs, such as interest-free loans, low-interest grants, or other grants to help low-income families cover necessary expenses, which relieves financial pressure and makes it easier for them to repay their debts But if the bank considers it a high risk and needs to compensate for that risk by charging a higher interest rate Lending policies can have high interest rates for low- income borrowers that can get trapped in a debt spiral and fall into misery.
Loan Term: A loan with a longer term can make it easier for low-income borrowers to repay It helps them break down their debt and reduce their monthly payments, helping them balance their financial expenses But if low-income borrowers are unable to repay their loans in full and on time, they may experience increased debt and become indebted This can make it difficult for them to meet the basic needs of life, such as eating, living, and medical care.
Minimize collateral requirements: To help low-income borrowers meet loan policy requirements, financial institutions may reduce collateral requirements, or strengthen insurance policies for loans In some cases, low-income borrowers may have difficulty meeting credit assessment requirements in order to obtain a loan This can make it impossible for them to get the money they need to solve their financial problems.
In summary, lending policies can have both positive and negative effects on low-income borrowers Depending on how loan policies are designed and managed, they can help borrowers improve their financial status and quality of life, or pose financial hardship and risk to borrowers Therefore, lending policies need to be carefully designed to ensure that they benefit low-income borrowers without negative effects.
Lending policies have an impact on foreign investors' decisions and behavior: Interest rates: Low interest rates can make loans attractive to foreign investors, while high interest rates can make borrowing more difficult An increase in interest rates can reduce foreign investors' interest in investing in a country.
Loan term: The loan term can also influence foreign investors' investment decisions.
If the term is too short, the loan may become difficult to repay, while if the term is too long, the investor may be risk averse or worried about borrowing money for too long.
Security requirements: Security requirements (such as collateral) can influence foreign investors' interest in borrowing If the requirements are too strict, the investor may not want to take the risk, while if the requirements are too low, the loan may become too risky.Lending conditions and procedures: Lending conditions and procedures may influence foreign investors' decision to invest If the lending process is too complicated or requires too much paperwork, the investor may not want to invest in that country.
In summary, a country's lending policies can influence foreign investors' investment decisions, including interest rates, loan terms, security requirements, and terms and conditions continue lending.
CASE STUDY ANALYSIS
Green Credit
Green credit (English is Green Credit) is understood as the lending by credit institutions for consumption, investment, production and business needs without causing risks to the environment, contributing to protecting the system general ecology.
4.1.2 Why does green credit need to be implemented?
Along with socio-economic development, the environment is increasingly heavily influenced by people's lives and production activities of enterprises Green credit is a necessary step in the context of global climate change, especially when Vietnam is assessed as one of the countries with the leading pollution levels today At that time, the role of credit institutions, especially banks, was pushed up with the trend of green credit.
Implementing green credit will help encourage business and production activities that have a positive impact on the environment, while accelerating the transition to clean energy and using advanced technologies to reduce the impact of industries on the environment. 4.1.3 Evidence of green credit implementation in Vietnamese commercial banks Green credit framework - VPbank
VPBank has issued a Green Credit Framework to provide a process for using and managing green loans to lend to projects that meet green criteria This program is applied to customers who need to borrow capital for the purpose of investing in environmentally friendly plans and projects, which can be mentioned in industries such as: Renewable Energy; Efficient power generation and reduced carbon emissions; Energy Efficiency (Energy Efficiency); Green Buildings (Green Buildings); Water Efficiency (Water Efficiency); Waste treatment; Agriculture, forestry and sustainable land use; Pollution prevention and control;… VPBank also offers lower interest rates on green projects and provides technical support to their customers The Green Lending Initiative has brought positive results for the economy and the environment:
They have succeeded in promoting sustainable development and reducing carbon emissions.
Encourage businesses and social organizations to invest in sustainable development projects, in order to minimize negative impacts on the environment and meet international environmental standards.
Improve people's quality of life by investing in green infrastructure projects, improving the living environment and benefiting public health.
Minimize risks for investors and financial institutions by assessing investment projects from an environmental perspective and ensuring the sustainability of loans.
Since 2015, VietinBank has promoted activities to seek global concessional capital to finance green fields The highlight is the signing of a cooperation agreement betweenVietinBank and the International Finance Company (IFC) The agreement not only creates a source for VietinBank to implement preferential policies, but also supports the bank with knowledge and experience in financing and lending for the Green Credit program in Vietnam. Also in this agreement, VietinBank has determined that it will give priority to granting green credit to projects promoting CO2 emission reduction and energy saving projects During the implementation of the program, VietinBank has granted credit to businesses to invest in machinery and equipment, supplement working capital to serve production and business activities of environmentally friendly products and equipment , protect the health of consumers and do not pollute the environment.
In order to circulate green credit capital to customers, VietinBank also quickly implemented programs oriented by the Government and the State Bank such as: High-tech clean rural agriculture loans, guidance on credit granting used to invest in solar farm and wind power projects At the same time, customers operating in the green field are also proactively applied by VietinBank with preferential policies through suitable credit products/programs such as: Accompanying customers, VietinBank SME Stronger package with the following topics: Parallel development with preferential policies on interest rates and fees, optimizing capital use efficiency, improving operational efficiency, expanding production and business; willing to innovate with incentives based on industry characteristics, business areas and business connections in the supply/distribution chain; and have the strength to reach out to provide domestic and international connection solutions, increase opportunities to connect with customers, cooperate in business and expand operating markets. 4.1.4 The effects green credit brings
Green credit can help strengthen financial sustainability and promote green economic development On the one hand, it can support capital for projects of individuals and businesses, making a positive contribution to the development of the economy On the other hand, loans for investments in renewable energy, waste treatment, development of environmentally friendly products and other projects can help enhance green economic development and reduce environmental problems.
These loans help businesses and consumers invest in green projects, reduce the impact of business operations on the environment, and help protect natural resources Green credit can enhance production capacity and improve financial efficiency for businesses, helping them achieve a balance between profitability and social responsibility.
Focusing on green projects can help banks reduce credit risk, as green projects are often highly profitable and have little environmental impact To ensure effective risk management, banks need to conduct asset risk assessments and ensure the feasibility and sustainability of green projects before lending.
Green credit products play an important role in building the bank's image in the eyes of the public The bank can take advantage of green credit activities to build and strengthen a good image of a bank that is responsible for the environment and the community.
In the specific link between economic development and environmental protection,banks act as an intermediary link, indirectly affecting the environment through customer activities The trend of green credit towards comprehensive and sustainable development is forecasted to increase more strongly in the coming time thanks to the policy support of the management agency Resources for green finance are becoming essential Recognizing the problem from the pioneering banks in green credit, from which to draw lessons to continue to improve the development green growth strategies:
Banks must have awareness and understanding of environmental and social issues; develop policies and procedures for environmental and social risk management; comparing environmental and social risk management in Vietnam with international practices…because of the risks that a polluting project could have on themselves if they finance the project In a world that is following the trend of sustainable development, projects that are not environmentally friendly will have to bear a lot of pressure, causing the project to be boycotted or suspended, leading to business bankruptcy bankruptcy, default is inevitable. This end is also equivalent to the arising of bad debts at banks, which have granted credit to investors, not to mention the reputation and reputation of banks are also affected by lawsuits from people related to this project.
Developing long-term strategies and supporting policies for green credit to develop further in the coming time, considering aspects to be ready to trade off economic benefits from projects Environmental impact projects and becoming a "greener" bank with unseen benefits show the importance of green credit in the sustainable development of the bank. Strengthen the capacity of officials and employees in implementing green credit through training organization, through seminars with the participation of countries with experience in green credit in the world in order to improve awareness for officials and employees about green banking - green credit activities Besides, raising awareness of efficient and economical use of energy, natural resources and environmental protection; improve the professional level of assessment of environmental and social risks of projects; Communication should also be promoted so that information and policies on green credit are closer to officials and businesses need to be updated.
Actively access green international capital through key ministries/departments/sectors, or directly approach financial institutions, NGOs, Green Credit Trust Fund (GCTF established by SECO in Vietnam) Vietnam)… to get funding to support green projects The SBV can through its tools, encourage commercial banks to join in supporting the development of green credit, such as reducing the required reserve ratio or having incentives for banks with a higher total ratio high green credit balance; adjust the conversion ratio of green credit balance to a lower level than other credits when calculating risky assets; increase the allowable bad debt ratio of green credit development banks in order to encourage commercial banks to spend capital to lend to customers' green projects and plans; Credit products need to be fully appraised for environmental and social risks
Research and implement green credit products; adopt policies to encourage lending to environmentally friendly projects and business plans such as interest rate incentives, loan terms, etc., at the same time, widely publicize these programs and actively seek suitable customers Or the Government needs to study the guarantee for green investment projects; improve current regulations in the direction of encouraging banks to deploy green credit, and at the same time coordinate with donors to learn from international experiences.
Microfinance lending programs
Microfinance is the granting of small loans to low-income households (called microcredit) for the purpose of helping them engage in productive activities or start businesses small Microfinance often entails a series of other services such as credit, savings, insurance, because the poor and low-income people have a great need for financial products, but are difficult to access formal financial institutions
4.2.2 Why should a microfinance program be implemented?
Vietnam is a developing country, with increasing financial needs in the process of urbanization and industrialization Individuals and households need loans to increase production, expand businesses or invest in education, health, building materials and other living needs Combined with the fact that individuals and households have a need for loans but do not have access to traditional financial sources This is especially common in rural areas and developing regions Microfinance programs can have many benefits for both the economy and small and medium-sized businesses Therefore, microfinance becomes one of the programs that need to be implemented by Vietnamese commercial banks.
Over the past years, with the correct renovation policy of the Party and State, Vietnam has achieved many impressive achievements in economic development and especially in poverty reduction, which has contributed significantly encouragement of microfinance.Microfinance activities have been asserting an important role in supporting the poor and low- income people to access financial and banking services in a convenient and appropriate manner Reality has proven that microfinance is an activity of profound social significance