Vietnam’s green finance market is often described as a fast mover.
It ranks second in Southeast Asia for green bond issuance and has expanded its green funding pool fivefold over the past decade. Yet beneath this growth lies a structural contradiction:
Capital is available — but not reaching the businesses that need it most.
According to this statistic from Enternews: Vietnam Chamber of Commerce & Industry, Green credit accounts for just 4.5% of total outstanding loans, while green bond issuance remains modest at around US$1.16 billion.
For Vietnam’s small and medium-sized enterprises (SMEs), access remains limited — and the consequences are growing.
Without funding, firms struggle to meet tightening environmental standards from global partners, risking compliance gaps, lost contracts, and reduced competitiveness. Over time, this disconnect could also weaken Vietnam’s attractiveness to international green investors.
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Bankable in Theory, Unprepared in Practice
At the core of the issue is not a lack of viable projects, but a mismatch between lender expectations and SME readiness.
To access green finance, companies must meet strict bankability criteria, often through partnerships with commercial banks and development finance institutions. This requires strong financial records, predictable revenue streams, and robust balance sheets.
As Matthew McGarvey, Co-Founder of Xylem Capital and Mekong Centre for Climate Finance, explains, lenders rely heavily on income statements and financial stability to assess risk.
But most SMEs are not there yet.
In sectors prioritised for green finance — such as renewable energy and sustainable agriculture — 92.8% of SMEs are still in early stages of development, with unstable revenue streams and limited operational history.
Based on Voice of Vietnam, beyond financials, many firms also lack the internal expertise required to navigate green financing processes, including:
- Emissions accounting
- Lifecycle measurement
- Technical documentation for loan applications
As Mickaël Driol, CEO of Mekong Partners, notes: “Failure does not mean their projects lack merit. In fact, they are under-documented.”
The result is a growing volume of incomplete or unsuccessful applications — leaving green capital underutilised.
Compounding this, SMEs often receive no preferential interest rates for green projects, reducing incentives to take on additional risk. Financial institutions, in turn, remain cautious, questioning whether smaller firms can absorb and manage larger loans effectively.
The “Green” Definition Problem
Even when SMEs are willing to invest, another barrier emerges: uncertainty around what qualifies as “green.”
Following new national taxonomy frameworks, businesses are accelerating efforts to upgrade technology and align with sustainability standards. On paper, this looks like progress.
In practice, it has created confusion.
A report by PwC highlights a widespread issue: companies are investing in green technologies without fully understanding how to define, measure, or communicate their environmental impact.
This disconnect is particularly visible in Vietnam’s textile sector.
Based on statistics by the Vietnam Textile and Garment Association, while around 20% of firms have begun green transformation, many focus on equipment upgrades — such as eco-friendly machinery or alternative materials — without building a coherent sustainability framework.
Tran Van Quy, CEO of Trung Quy Textile and Garment Co., Ltd, told Vietnam.vn that his firm has adopted environmentally friendly materials, including organic, recycled, and bio-based fibres such as bamboo, lotus, pineapple, coffee, and wool.
However, for most SMEs, these efforts remain fragmented.
Without a clear definition of “green,” companies struggle to:
- Select appropriate technologies
- Allocate capital effectively
- Align projects with financing criteria
This leads to a critical misstep:
Skipping the foundation and jumping straight into execution.
When Good Intentions Trigger More Scrutiny
The lack of clarity does more than slow progress — it increases risk.
As SMEs rush into green upgrades without structured frameworks, lenders are becoming more cautious. Applications are now subject to stricter verification processes, with banks questioning whether projects genuinely qualify for green finance.
As Matthew notes, lenders are increasingly wary of companies attempting to fit into green frameworks without meeting underlying criteria.
At the same time, firms are being asked to demonstrate:
- Full operational alignment with sustainability goals
- Multi-year visibility of environmental impact
- Verifiable, standardised data
This raises the bar significantly.
Without proper preparation, SMEs risk falling into a greenwashing trap — undermining both their credibility and the integrity of the broader market.
From Constraint to Strategy: How SMEs Can Unlock Access
Despite these challenges, the pathway forward is clear.
To access green finance, SMEs must shift from reactive compliance to proactive readiness.
As Mickaël Driol suggests, companies should focus on three critical pillars:
- Embed measurement and verification into core operations
- Adopt recognised standards such as ISO 14064, the GHG Protocol, or science-based targets
- Digitalise monitoring and reporting systems for energy use and supply chains
These steps not only improve transparency but also reduce verification time and increase lender confidence.
As Rich McClellan, Chief Executive Officer at Vietnam’s International Financial Centre in Ho Chi Minh City, notes, SMEs that build credible verification systems and transparent reporting structures are significantly more likely to unlock green financing opportunities.
In fact, SMEs with externally verified baselines can achieve approval rates two to three times higher.
Equally important is strengthening basic bankability:
- Improve financial transparency
- Clearly document efficiency gains
- Align with international ESG frameworks
As global standards tighten — from the EU to ASEAN and IFC — projects that meet these benchmarks are more likely to receive funding.
The Real Bottleneck: Readiness, Not Capital
Vietnam’s green finance market is not constrained by capital.
It is constrained by alignment.
While funding continues to grow, the gap between lender expectations and SME capabilities is delaying deployment — increasing compliance risks, raising transition costs, and limiting the country’s ability to fully capitalise on its green growth ambitions.
The next phase will not be defined by how much capital is available.
It will be defined by how effectively businesses can prepare to receive it.
Because in Vietnam’s evolving green economy, access to finance is no longer just about eligibility.
It is about readiness.
And for SMEs, closing that readiness gap may be the most critical step toward turning green ambition into real, scalable progress.
Editor’s Note:
This article was contributed by NewInAsia editorial fellow Le Ha Phuong (Nora), a freelance podcaster and former radio producer who creates current affairs content blending expert insights with engaging storytelling.
In this piece, she explores how Vietnam’s growing pool of green capital is failing to reach SMEs — and why gaps in readiness, documentation, and alignment with lending frameworks are limiting access to climate finance.
To pitch your story or share reflections on sustainable finance, SME growth, or the future of green economies in Asia, contact the NewInAsia editorial team.
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Read the Chinese article here.
