"Although many problems persist, the legal framework on green credit has been improving day by day," said Nguyen Ba Hung, chief economist of the Asian Development Bank (ADB) in Vietnam, at a conference on green financing held by Vietnam Investment Review in Hanoi on December 4. ​​

The State Bank of Vietnam (SBV) has issued many legal documents and policies to promote green credit, including Directive No.03/CT-NHNN, Circular No.08/2016/TT-NHNN, and Circular No.06/2022/TT-NHNN.

The SBV has also implemented many solutions to promote green credit with more efforts made to support credit institutions to issue green bonds, access capital from international organisations, and participate in green financial cooperation programmes.

As a result, green credit activities in Vietnam have gained traction. Vietnam's total green credit balance stood at VND528 trillion ($22.3 billion) in June, accounting for about 4.2 per cent of the total outstanding credit. Vietnam boasts over 40 credit institutions offering green funding, exhibiting an annual growth rate of approximately 20 per cent.

According to Hung, businesses can seek cooperation opportunities with international financial institutions. These institutions play an important role in mobilising capital for green credit through forms such as direct loans, indirect loans, non-refundable grants, guarantees, technical assistance, financial support, and policy support. Some international financial institutions include the Asian Development Bank (ADB), the World Bank Group, including the International Finance Corporation, along with other bilateral partners such as France's AFD, the German Development Agency, the EU, and USAID.

However, Hung also pointed out some setbacks to unlocking Vietnam's green credit. Currently, the legal framework for green finance is unable to meet practical requirements and there is a lack of driving forces to promote green credit development, while the number of green products is also limited.

To promote the development of Vietnam's green finance market, one expert from the ADB recommended that Vietnam continue to improve the legal framework surrounding the green economy and green finance to meet international standards.

"Currently, commercial green capital sources do not bring many financial benefits. Therefore, the government needs to issue incentive mechanisms, such as reducing corporate income taxes for financial institutions to develop green credit and support interest rates for green credit loans," he said.

He further noted that policymakers need to maintain flexible financial management policies and proactively access international capital sources through bilateral cooperation as well as international financial institutions.

In addition, the government must accelerate the implementation of certificate validation and the formation of a domestic carbon market connected to the international carbon market. This channel can create additional revenue for economic activities, giving incentives for businesses to convert to green activities faster and on a larger scale.

Hung recommended that the government take pioneering steps in issuing green bonds based on budget expenditure management for green items. "As a result, the green bond market will become more vibrant and draw in major investors," he said.