IFC lends $100 million to OCB to boost climate finance in Việt Nam

July 12, 2021 - 08:31
IFC’s investment will help OCB improve its outreach to SMEs in Việt Nam.


Transactions at OBC's branch. The bank is borrowing US$100 million from IFC to expand lending to small and medium enterprises (SMEs) and boost financing for climate-friendly projects in Việt Nam. — Photo vietnamplus.vn

HÀ NỘI — International Finance Corporation (IFC) is providing a US$100 million long-term loan to Orient Commercial Joint Stock Bank (OCB) to help expand lending to small and medium enterprises (SMEs) and boost financing, especially for climate-friendly projects in Việt Nam.

IFC’s investment will help OCB improve its outreach to SMEs in Việt Nam, which are facing a financing gap of $21 billion, equivalent to 11.2 per cent of the country’s GDP. With IFC’s 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 Việt Nam is just about 5 per cent or $10.3 billion and is expected to increase significantly in the coming years. As the country aims to reduce GHG emissions by 9 per cent by 2030 to mitigate climate change impact, this presents a $753 billion climate-smart investment opportunity for Việt Nam between 2016 and 2030, according to an IFC study. 

To help OCB tap into this huge lending potential, $50 million of the funding will be earmarked for climate-friendly projects, creating new options for businesses to obtain green financing.

While the State Bank of Việt Nam 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 Việt Nam, Cambodia, and Laos.

“By supporting commercial banks in Việt Nam to establish a viable climate-finance portfolio, IFC is facilitating the development of a climate-finance market, attracting international lenders and further supporting Việt Nam’s shift to a low-carbon and resilient growth model.” — VNS