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Boosting green credit for sustainable development in Viet Nam

Blog | Fri, 05 Jan, 2018 · 9 min read
Boosting green credit for sustainable development in Viet Nam

Small household Dinh Như, village 5, Vinh Thuan commune, Vinh Thanh district borrowed VND 40 million from VBSP to plant 2 acacia hectares, 1 bean hectare and raise 4 breeding cows. (photo: VBSP Bank)


Due to climate change, environment pollution and the depletion of natural resources, green and sustainable growth is becoming a global priority. In Viet Nam, the National Climate Change Strategy and National REDD+ Programme are receiving the special attention of the Government. The Government of Viet Nam has also launched the National Green Growth Strategy (VGGS) that includes the implementation of REDD+. The main objectives of VGGS are to use natural resources efficiently, reduce greenhouse gas emissions, respond to climate change and contribute to poverty reduction while attaining sustainable development.

One of the main stakeholder groups implementing the National Green Growth Strategy of Viet Nam is the banking sector. The banking sector is beginning to determine investment funding for green growth projects while playing an important role in supporting industries achieve sustainable economic development. Within this context, green credit policies have been identified as a key instrument for the success of Vietnam’s economy.

Interestingly, Vietnam Bank for Social Policies (VBSP), which is a public not-for-profit bank, is adopting a REDD+ related methodology to promote green growth. As a pioneering Vietnamese bank that mobilises investment funding from domestic and international sources, VBSP is linking REDD+ to green growth with a view to meeting Vietnam's national objectives on climate change, poverty alleviation and sustainable development.

Serving nearly 7 million household clients who are living below the poverty line, while supporting other vulnerable groups, VBSP has established provincial branches, district transaction offices, transaction points, and around 200,000 savings and credit groups at village and hamlet level. The bank enables financial inclusion of the poor and other disadvantaged groups through grassroots networks, appropriate infrastructure, community-centered procedures and sensitised employees.

Small householder Dinh Như of Vinh Thanh District is involved in plantation while raising livestock. In 2010, he borrowed VND 8 million from VBSP to build a small house for his family. Then he obtained a loan of VND 40 million from VBSP to plant two hectares of acacia, one hectare of beans, and raise 4 breeding cows. He has earned an income of over VND 30 million per year after deducting investment expenses. This has uplifted his family from poverty and provided a more stable lifestyle.

Farmer Le Thi Hoc’s family of Bac Tra My District borrowed VND 100 million from the bank to invest on 10 hectares of plantation in 2006. He states that “after six years we earn from VND 60 to 70 million per ha after deducting investment costs. We repaid all debt in 2012 and continued to borrow VND 200 million to expand into 20 hectares. Not only did we pay back the debt, but we also had enough money to build a new house and purchase modern appliances".

Boosting green credit for sustainable development in Viet Nam
Farmer Lê Thị Học, Hamlet 3, Tra Giang Commune, Bac Tra My District, Quang Nam Province, borrowed from VBSP to invest in 10 hectares of plantation.

VBSP’s loan programmes require evaluation reports on environment impact. This enables to disqualify loan projects that are detrimental to the environment and society even if they are financially viable. The bank has also implemented credit programmes promoting reforestation, forest restoration, and environmental protection. This includes Forest rehabilitation and sustainable forest management funded by the German Reconstruction Bank in line with REDD+ requirements; Forest Sector Development Project (FSDP) funded by the World Bank; Coastal Wetlands Protection and Development project (CWPD); and a credit program for productive forestation with livestock raising. These initiatives have resulted in 76,500 ha of conserved special use forests and sustainably managed plantation forests.

Vietnam’s forest coverage had decreased – from 14.3 million ha in 1943 – to 10.7 million ha by 2005. After decades of deforestation, the country had 7-8 million ha of degraded forest land. The Government realised that this was caused due to many factors including an inadequate incentive framework; insufficient market orientation; heavy top-down planning; weak extension capacity; limited technological and managerial capacity; and inadequate investment. To address these challenges, the Government of Viet Nam has been implementing the National Target Programmes on Forest Protection and Development from late 1990s, including the “Five Million Hectare Reforestation Program (1998-2010), National Forest Protection and Development Plan (2011-2020) and Program for Sustainable Forestry Development (2016-2020).

Under these programmes, VBSP is financing the Production Forest Plantation project which aims to green 70,300 ha of plantation forest. Using a unique approach of switching from subsidised plantations to small-holder lending has proved to be extremely sustainable. Up to now, more than 45,000 under-privileged households in central Vietnam have received access to microfinance with technical support to cultivate plantation forests.

In the future, the bank aims to enhance public-private partnership and implement REDD+ related green growth projects. This would contribute to sustainable natural resource management, biodiversity conservation, and the implementation of the National Strategy on Climate Change while contribute towards poverty alleviation and sustainable development in Vietnam.

For more information on REDD+ related green growth projects of VBSP Bank, please contact Ms. Phuong Chi via email: