IFC helps Vietnamese banks improve sustainable project lending, curb risks

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The information was released by IFC at a banking workshop held recently in Hanoi by IFC and the Institute of Manpower, Banking and Finance.  

Cat Quang Duong, vice head of the Department of Credit for Economic Sectors under the State Bank of Vietnam (SBV), said a circular on assessing environmental and social risks which is being compiled by the SBV in cooperation with IFC will be promulgated next month.

“Currently, preparations for enacting the circular are about to finish,” said Duong.  

Once the circular takes effect, banks will have to abide by strict regulations prior to lending projects relating to environment and society such as energy and mining. The SBV will also compile a set of standards on assessing environmental and social risks for between five and ten industries that have high environmental and social risks and also the industries borrowing quite lot from credit institutions.    

According to Duong, the promulgation of the circular will create a fair playground for all credit organisations participating in Vietnam’s banking market, specifically, the credit institutions applying environmental and social management system will enjoy big benefits such as improving significantly the quality of the entire credit portfolio or expanding the market share thanks to new environmentally friendly products/services.

“Investing in businesses that are commercially sound, provide people with incomes and other benefits, and treat the environment with care is strategically smart as it will support financial institutions’ business model,” said Simon Andrews, IFC regional manager for Vietnam, Cambodia, Lao PDR, Myanmar and Thailand. “If banks address environmental and social challenges of projects they finance, they will reduce their own risks and even open up new business opportunities, such as energy-efficiency and renewable-energy financing.”