vietnam, green growth, sme

1. Vietnamese Green Growth Strategy:
Promoting SME Growth
Dr. Jason Kassel
Lecturer, RMIT University Vietnam (Hanoi)
Centre of Commerce & Management

2. Vietnam National Green Growth Strategy
Launched in 2012
Action Plan launched in 2014
Three focal points:
Low carbon growth
Greening of production
Greening of lifestyles

3. Directive 03/CT-NHNN
March 2015, the State Bank of Vietnam (SBV) enacted the Directive No. 03/CT-
NHNN “On Promoting Green Credit Growth and Environmental-Social Risks
Management in Credit Granting Activities”
Encourages credit institutions to
Actively develop green credit programmes
Implement management systems for environmental and social risks in credit granting activities
None of the stipulations made in Directive No. 3 are mandatory

5. Green Finance
From the financial institutions’ perspectives comprises financial products and
services that
1. Promote environmentally responsible investments
2. Stimulate low-carbon technologies, projects, industries and businesses
Green finance products financial institutions usually consider environmental
factors in their internal procedures, e.g. loan sanctioning, monitoring or risk
assessment
Green finance covers not only investment costs but also operational costs such as
production preparation or land acquisition costs for green projects

6. Sustainable Production and Consumption (SCP)
Aspects of SCP most relevant for SMEs are:
1. Reduction of energy and material intensity of goods and services production
2. Reduction of waste and emissions from raw material extraction, production,
consumption, and disposal
3. Application of life-cycle thinking in all stages of product life

7. The Vietnam Environmental Protection Fund (VEPF)
The VEPF was established in 2002; since then it has spent VND 1 trillion (EUR
41.2 million) for over 180 projects in various sectors
Supports conservation and pollution control projects - soft loans and interest
rate support
Eligible projects - waste management, emissions reduction, nature conservation
and biodiversity protection, etc.
Loans given at an interest rate of around 5% (in 2015 the VEPF announced that
it would further reduce interest rates to 3.6%)
Loans can cover up to 70% of a project’s investment costs

9. Other VN Government Sources
National Foundation for Science and Technology Development (NAFOSTED)
provides interest-free or low interest loans as well as loans guarantees for
SMEs
Vietnam Green Growth Strategy Facility channels funding to green investments
projects (MPI and Belgium Government)
National Technology Innovation Fund (NATIF) - Promotes SME access to
finance for technology innovation, preferential loans and loan guarantees for
technology research, transfer, innovation and improvement in SMEs and
start-ups.

10. German Agency for International Cooperation
German Agency for International Cooperation (GIZ) is cooperating with
Vietnamese public and private stakeholders to develop a green credit policy
In preparation of the policy, a pilot programme is being developed for green
financing of SMEs focusing on waste management, organic agriculture and
renewable energy management.
Piloting of the green finance approach will be completed by the end of 2017.
The green financing policy will be based on the results of the pilot phase.

11. Green Investment Facility (GIF)
Supported by the Danish Government
Aims at promoting the uptake of energy efficiency measures by SMEs in the
brick, ceramic and food processing sectors
Offers loan guarantees and grants for SMEs with fewer than 300 employees
that invest in energy efficiency measures
In order to be eligible for funding
Reduce the company’s energy consumption or greenhouse gas emissions by at least 20%.
The investment sum has to be between VND 400 million and 4 billion
GIF can guarantee 50% of the value of a loan

13. Vietnam Green Credit Trust Fund (VGCTF)
Supports medium- and longterm investments of Vietnamese SMEs in cleaner
production technology
Financed by the Swiss Secretariat for Economic Affairs and coordinated by the
Vietnam Cleaner Production Centre
VGCTF cooperates with three commercial banks - Techcombank, Asia
Commercial Bank, Vietnam International Bank
Provides loan guarantees and performance-based grants
VGCTF guarantees 50% of the capital borrowed by SMEs if loan amount is in
the range of EUR 9,000 – 942,000

14. Vietnam Inclusive Innovation Project
Funded through a EUR 51.8 million loan by the World Bank’s International
Development Agency (IDA)
Targeted at promoting inclusive innovations
SMEs will be given loans and/or grants for
1) upgrading, scaling up and commercialisation of inclusive technologies
2) acquisition, adoption and use of modern technology
Vietcombank and Vietinbank have been selected to channel loans of up to EUR
471,000 to eligible SMEs
Borrowers have to pay at least 20% of the project cost using their own capital

15. Demand-Side Barriers
Complex and resource-intensive application procedures prevent SMEs from
accessing financing sources
SMEs lack status and adequate documents to produce convincing funding
proposals
SMEs do not create enough demand for green finance due to a lack of
1) pressure from government and customers
2) awareness on investment potentials and funding sources

16. Supply-Side Barriers
As banks are risk averse and classify SMEs as risky customers, they are
generally hesitant to provide SMEs with financing
Financial institutions offer unattractive loan conditions
The sanctioning process of financial applications often takes too long
Lack of continuity of donor-financed programs
High transaction costs for establishing business relations and trust make SMEs
and green investments less profitable and attractive for financial institutions
Lack of knowledge on green investment concept and green technologies makes
financial institutions hesitant to make more green finance available for SMEs

17. Directive No 3 and Next Steps
The only dedicated push for green finance by the government has been the
Directive No. 3
With the Green Growth Strategy government has made clear that green topics
matter
With the further development of the financial sector in Vietnam, green issues
should be considered in more of the government programmes that relate to
SME financing
The effect of the Directive No. 3 on the green financing landscape remains to be
seen.
Necessary to make the Directive’s provisions mandatory.