Solutions on VBSP’s social and environmental risk management

(VBSP News) As the lifeblood of the economy, the domestic banking system is currently playing an important role in eliminating projects with adverse impacts to environment & society, and green & sustainable growth. According to the green banking survey report in 2019 of State Bank of Vietnam and Asian Development Bank, the whole country has 22 credit institutions, including VBSP, providing green credit with total outstanding loans of VND 284.5 trillion.

Solutions on improving environmental, social and climate risk management at VBSP

VBSP proposed some following solutions to improve the effectiveness of environmental, social and climate risk management in policy credit activities:

(i) Developing a system of indicators for early recognition and warning of credit risks, including environmental, social and climate risks.

(ii) Developing and training high-quality human resources on risk management, which have professional ethics, full skills, and meet the requirements of professional tasks.

(iii) Developing a manual for the assessment of environmental, social and climate risks for individual customers, households, SMEs.

(iv) Developing documents and technical standards, detailing the banned materials, production and discharge processes that violate environmental laws and are harmful to human health, use illegal labour, activities that infringe on relics and destroy traditional cultural values. These documents and technical standards will be applied for each investment portfolio in each loan project affecting environmental, social and climate risks.

(iv) Documents should be printed specifically, simple, readable, understandable and coded attached to each specific investment portfolio, products and goods in the electronic loan applications.

(v) Issuing specific guidelines and mandatory professional enforcement at VBSP; strengthening training, educating and propaganda.

(vi) Developing new green credit products such as lending to households for investment, installation and purchase of renewable energy products, biogas projects in rural areas.

Developing lending models along the value chain. Targeting customers to participate in the value chain of investment projects of the green field. If social and environmental risk management is ensured, VBSP's customers are also guaranteed to do so. (For example, the joint model of growing vegetables for a corporation to supply supermarket chains and convenience stores, customers who participate will ensure the technical factors of production, fertilizing, pesticides, waste treatment, food hygiene and safety... according to regulations to comply with the company's requirements on social environment and climate. When large corporations are complied with, customers participating in that value chain also ensure well environmental, social and climate risk management).

(vii) Organizing the training courses for VBSP staff, mass organizations and SCGs to perform well the task of guiding, assessing, appraising and controlling environmental, social and climate risks.

Coordinating with socio-political organizations on guidance and communication on environmental and climate risk reduction. Providing documents on actions to reduce emissions, environmental protection, planting and forest protection, etc.

Recommendations

Environmental, social and climate risk management capacity improvement in policy credit

- SBV and IFC should assist in the development of a regulatory manual on environmental, social and climate risk assessment to individuals and households.

- Environmental, social and climate risk management should be specified by regulations and sanctions.

- There should be specific regulations for VBSP in implementing this content from the Government and SBV.

- Supporting in training, guidance and propaganda.

- SBV should assist VBSP in developing procedures and guidelines for risk identification for individuals, households, production and business establishments, SMEs. In which, there is the identification of environmental, social and climate risks suitable to the characteristics of small-scale production and business, VBSP’s specific customers and staff, mass organization officers.

- Improving the quality, effectiveness and efficiency of the inspection and supervision system.

- Developing the technology system in the direction of technological innovation, improving the ability to apply modern technology infrastructure in order to diversify products and services, better serve the policy beneficiaries approved by the Government, contributing to the implementation of the Government's National Digital Transformation Strategy and modernizing the management and administration of VBSP.

- Completing the regulations and guidelines of risks due to objective causes, suitable to the target customers, ensuring publicity and transparency. Debt classification and risk provisioning ensure sufficient capital to handle risky debts.

- Timely, accurately and objectively handling risky debts following regulations to support customers to promptly overcome difficulties, restore production, create livelihoods and stabilize their lives.

Resource concentration for VBSP to effectively implement policy credit programs

- Concentrating the state resources to effectively implement policy credit programs, ensuring the successful implementation of the Resolution of the 13th National Party Congress. Allocating sufficient capital for implementation in the medium-term (3 - 5 years) public investment plan and annually submit it to competent authorities for approval in accordance with the Law on State Budget and the Law on Public Investment.

- Balancing and prioritizing the allocation of local entrusted budget to VBSP to supplement capital sources for the poor and other policy beneficiaries.

- Maintaining a deposit balance equal to 2% of the balance of capital mobilized in VND as of December 31 of the previous year from state-owned credit organizations at VBSP.

- Researching and proposing to the competent authorities to increase the bonds guaranteed by the Government.

- Maintaining transaction activities on the interbank market, participating in the open market to diversify capital mobilization and use activities. Increasing capital mobilization through the issuance of valuable papers, mobilizing capital from deposits and loans of domestic and foreign organizations and individuals.

Maintaining and promoting the effectiveness of a specific organizational model and credit management method

Promoting the roles and responsibilities of the BOD, Representatives of the BOD at all levels in advising, formulating policies, directing and supervising the implementation of preferential credit policies of the State and effective and efficient management of VBSP. Effectively implementing administration activities from central to grassroots levels, proactively concretizing and effectively implementing assigned programs, plans and tasks. Strengthening facilities, equipment and working facilities to meet operational requirements in the new period.

Vbsp.org.vn