The International Finance Corporation (IFC) has provided a 100 million USD long-term loan for the Orient Commercial Joint Stock Bank (OCB) to increase the private sector’s contributions to green and sustainable growth in Vietnam.
|Illustrative image. (Photo: VNA)|
IFC’s investment will help OCB improve its outreach to small and medium enterprises (SMEs) in Vietnam, which are facing a financing gap of 21 billion USD, equivalent to 11.2 percent of the country’s GDP.
With this support, OCB expects to double its SME lending portfolio by 2024 by leveraging its digital banking platform and developing products that cater to the sector’s needs.
Some areas that SMEs are seeking financing for include renewable energy, energy efficiency, and climate-smart solutions, which can help them grow sustainably while contributing to reducing greenhouse gas (GHG) emissions.
The current share of climate financing – as a percentage of total bank financing – in Vietnam is just about 5 percent or 10.3 billion USD and is expected to increase significantly in the coming years. As the country aims to reduce GHG emissions by 9 percent by 2030 to mitigate climate change impact, this presents a 753 billion USD climate-smart investment opportunity for Vietnam between 2016 and 2030, according to an IFC study.
To help OCB tap into this huge lending potential, 50 million USD of the funding will be earmarked for climate-friendly projects, creating new options for businesses to obtain green financing.
While the State Bank of Vietnam has been promoting green banking over the past few years, the climate-finance market is still young and banks are now considering a systematic approach toward climate finance.
“IFC sees banks as a major force in fighting climate change in emerging markets such as Vietnam since they can strategically expand financing for climate-smart initiatives,” said Kyle Kelhofer, IFC Country Manager for Vietnam, Cambodia, and Laos.
“By supporting commercial banks in Vietnam to establish a viable climate-finance portfolio, IFC is facilitating the development of a climate-finance market, attracting international lenders and further supporting Vietnam’s shift to a low-carbon and resilient growth model.”
The Ministry of Planning and Investment is drafting a national green growth strategy and plans to submit it to the Government by June to accelerate the transition towards a carbon-neutral economy in Vietnam.
Once a policy to apply forest environmental and CO2 indicators is officially approved, Vietnam may participate more actively in the sale and purchase of carbon credits for both enterprises and localities.