Vietnam to subsidize 2% loan interest for green, circular economy projects

The information was disclosed by the representatives of the Ministry of Finance and the State Bank of Vietnam (SBV) at a conference on diversifying funding sources for sustainable development, organized by Tai Chinh-Dau Tu (Finance-Investment) newspaper on Monday.

In the opening remarks, Nguyen Ngoc Canh, deputy governor of the SBV, said the country’s long-term investment needs for green and sustainable economic development could reach US$600-700 billion by 2050.

He described this as a major challenge, requiring stronger mobilization of diversified financial resources, particularly through the development of green bonds and green credit, alongside state budget funding.

Canh said the banking sector plays a pivotal role in supplying capital to Vietnam’s green economy.

As of November 30, outstanding green credit stood at around VND750 trillion ($28.4 billion), with average annual growth of more than 21 percent over the 2017-25 period, outpacing overall credit growth in the economy.

However, Pham Thi Thanh Tung, deputy head of the Credit Department for Economic Sectors at the central bank, said that despite rapid growth, green credit still accounts for only about five percent of the total outstanding credit, which currently stands at VND18.2 quadrillion (around $689 billion).

To meet green growth targets and sustainability commitments, Canh stressed the need to diversify funding sources, particularly by attracting private capital through the capital market.

He said this would help ease pressure on the banking system while mobilizing medium- and long-term funding for the economy.

Vietnam to roll out 2% interest rate support package

Regarding preferential mechanisms for green projects, Pham Thi Thanh Tung said Resolution 68 on private sector development sets out a policy framework for interest rate support for green investments.

Following guidance from the Politburo, the SBV is working with the Ministry of Finance to submit to the government a decree providing a 2-percent annual interest rate subsidy from the state budget for private enterprises and household businesses borrowing from banks to implement green and circular economy projects.

The draft decree is expected to be submitted to the government for approval as early as this week and could be implemented from early 2026, Tung said, adding that the subsidy funds would be allocated to local authorities.

To ensure effective implementation, Tung said coordinated policies would be needed, including regulations on interest rate subsidies via commercial banks and funds, as well as a prime ministerial decision defining eligible green and circular projects.

Beyond bank lending, Pham Thi Thanh Tam, deputy head of the Department of Financial Institutions at the Ministry of Finance, said outstanding green corporate bonds had reached nearly $1 billion as of October 2025.

She said this was a positive sign that companies were increasingly seeking long-term funding from capital markets rather than relying solely on banks.

To further broaden funding channels for green projects, the Ministry of Finance is also studying a pilot scheme for issuing green service bonds, which is expected to be submitted to the government in 2026.