Sustainability-based loans the focus for top banks

August 21, 2023 | 17:23

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Foreign banks are actively joining consortiums to provide significant loans, particularly in the expanding sustainability arena.

Sustainability-based loans the focus for top banks, illustration photo/ Source: freepik.com

Local agriculture firm BAF Vietnam last week solidified its commitment to advancing sustainable practices by securing a substantial credit line of up to VND500 billion ($21.1 million).

Backed by foreign banks including Shinhan Bank Vietnam, Daegu Bank, and First Commercial Bank from South Korea and Taiwan, this credit line stands as a testament to the collaborative efforts aimed at reshaping the trajectory of Vietnam’s agricultural sector, BAF Vietnam said.

Particularly, the fresh capital injection is to facilitate the construction of the modern Giai Xuan Pig Farm Complex in the central province of Nghe An, adopting the integrated feed-farm-food model.

BAF’s loan terms comprise a tenure of seven years, inclusive of a two-year principal grace period. Previously, BAF successfully mobilised nearly VND900 billion ($38 million) from International Finance Corporation (IFC), the private sector arm of the World Bank Group.

Over the past six months, BAF’s total capital raised from foreign financial institutions totals VND 1.4 trillion ($59.1 million).

This evolving landscape is not confined to the agriculture sector alone, as other players are also capitalising on foreign banks’ active involvement.

Vietcap Securities last week announced the successful signing of a $100 million capital-backed loan agreement. The Mega International Commercial Bank facilitated this financing, using short-term interest rates tied to the global foreign exchange market.

The fresh capital injection positions Vietcap for yet another round of capital raising, following five previous funding successes. The enthusiastic response from the market underscores Vietcap’s investor trust and sets a precedent for future international capital collaborations, the company said.

Before hitting this milestone, Vietcap had already secured substantial international funds. Last month, it acquired $45 million in financing through Shanghai Commercial and Savings Bank’s offshore banking division.

“These strategic initiatives are aligned with our commitment to harness external funding sources to capitalise on the evolving landscape of the Vietnamese financial sector,” the firm’s representative said.

Thanh Thanh Cong - Bien Hoa JSC (TTC AgriS) entered into a deal in late July, securing an unsecured loan of up to $100 million from a consortium of nine financial institutions from Taiwan. Of this, First Commercial Bank – Taiwan’s third-largest bank – spearheads the credit arrangement and management.

FCB expressed its intent to consistently renew capital for TTC AgriS over a three-year duration.

In June, TTC AgriS completed its commercial capital sponsorship agreement with IFC and Sumitomo Mitsui Banking Corporation, securing a trade finance loan totalling $40 million. This capital is earmarked to enhance production capacity and market reach in alignment with TTC AgriS’s strategic growth trajectory.

TTC AgriS holds the unique distinction of being the maiden Vietnamese enterprise that IFC prioritises for a long-term partnership within its Global Warehouse Finance Programme. A TTC AgriS representative said, “This funding will encourage local banks to partake in the agricultural value chain, optimising opportunities in this high-potential sector.”

Thomas Jacobs, IFC country manager for Vietnam, Cambodia, and Laos, added, “Agribusiness is a priority for the IFC due to its potential for significant development impacts and its crucial role in poverty reduction.”

Joo Young Park - Head of Institutional Banking DBS Vietnam

DBS established its representative office in Vietnam in 2008 and opened its first branch in Ho Chi Minh City in 2010. Since then, we have been working to provide Vietnamese businesses with integrated banking solutions and greater market connectivity in Asia.

DBS firmly believes in the role of financiers to enable sustainable development. As a signatory of the Net Zero Banking Alliance, we committed to interim 2030 decarbonisation targets, and goal to achieve net-zero financed emissions by 2050.

We are mindful that different sectors and companies may be at different points in their sustainability journey. This is why we work closely with large and small corporates to advance their sustainability agenda – including the development, implementation, and measurement of environmental and socially responsible practices, as well as access to a suite of financial tools such as green, sustainability-linked, or transition financing.

Regarding Vietnam’s sustainability sector, DBS has consistently taken a proactive stance. An illustration of our involvement is the successful disbursement of a $77.5 million loan to BCG Gaia, a subsidiary of the well-regarded Bamboo Capital Group in Vietnam, with a focus on renewable energy initiatives.

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