Many green startups are "stuck" in the problem of borrowing capital from banks due to lack of collateral or unclear policies.
After winning the championship of a green startup accelerator earlier this year, Alternō Vietnam Joint Stock Company confidently applied for bank loans to expand its market. "We were rejected because we did not have fixed assets to mortgage," said Mr. Ho Viet Hai, co-founder and CEO of the company.
Alternō offers a sand-based thermal storage solution that replaces fossil fuels in agricultural drying and food processing. Their solution can help reduce operating costs by 5-15%.
Although they had a good launching pad from a number of prestigious awards in the field of environmental protection, they still faced many barriers, one of which was difficulty in borrowing capital from banks.
Alternō technicians test the system before handing it over to the customer, September 9. Photo: Alterno
Access to capital is also a challenge for Yeast Era Joint Stock Company. They produce biological protein by utilizing cassava and rice starch, or surplus agricultural products such as fresh fruit, as a carbon source for the fermentation process.
Yeast Era once raised capital on Shark Tank Vietnam and was the champion of the national creative startup talent search contest (Techfest 2024). But now they are stuck in the problem of balancing cash flow.
The new product to users has made Yeast Era's sales and revenue unstable. To have capital for development, they need to borrow from banks but are required to prove that the business is profitable or have collateral. "We rent the factory and land, so we cannot mortgage it," said Le Quang Thanh, Technical Director of Yeast Era.
In fact, it is not easy to borrow green capital from banks, even though startups have intermediary organizations to support them. A representative of the Vietnam Chamber of Commerce and Industry (VCCI) once worked directly with a bank to support capital for a green startup, but failed.
"Banks really want to lend, but the adjustment according to risk management criteria and green criteria is not clear, so they cannot provide capital," said Mr. Nguyen Tien Huy, Director of the Office of Enterprises for Sustainable Development of VCCI, at the ESG Forum on April 23.
Vietnam's green credit balance from 2015-2024. Source: FiinRatings/State Bank
Representatives of business support organizations emphasized that loan conditions are still complicated, requiring financial transparency, while there is a lack of green technology appraisal agencies. By the end of 2024, the country's green credit balance will be about VND679.000 billion, accounting for 4,35% of the total outstanding debt of the economy (VND15,6 million billion).
Ms. Pham Thi Thanh Tung, Deputy Director of the Department of Credit for Economic Sectors, State Bank of Vietnam, stated that the reason for the modest proportion is that Vietnam does not have a national green portfolio. The portfolio of 12 green sectors, issued by the State Bank in collaboration with the German International Cooperation Agency (GIZ) eight years ago, is no longer consistent with the national strategy on green growth or Vietnam's Net Zero commitment by 8, according to Ms. Tung.
"We need a national green portfolio, including all green transformation sectors and fields, to be able to provide funding. At that time, the scale of green credit will increase significantly," said a representative of the State Bank.
There is no shortage of capital, but unclear policies for startups to access the market are also barriers that "tie them down".Buyo Bioplastics Co., Ltd., the winner of Techfest 2023, said its products are well received in Europe, a market that has a single-use plastic ban, but are struggling in Vietnam.
They developed biodegradable materials technology from sugarcane bagasse and beer residue, with finished products such as cups, spoons, forks, and straws that can decompose in 3-6 months. However, the biggest difficulty for this green material startup is the price. One of their biodegradable straws costs about 220-250 VND, two-thirds higher than the plastic type.
Some of Buyo's bioplastic products. Photo: Buoy
Plastic alternatives can only develop when there is traction from user awareness and policy push. However, in Vietnam, due to the lack of policy leverage, they have to fend for themselves and compete on price with disposable plastic products.
In fact, green businesses have seen the market signal. Alternō representatives said their largest order was up to 2 million USD, coming from a Vietnamese company. For Buyo, although 70% of the output is for export, and most of the rest is sold to foreign companies in Vietnam, they still have a small number of domestic customers such as Com Tam Moc and Routine fashion.
However, currently 97% of Vietnamese enterprises are small and medium-sized, with limited awareness of green. Dr. Mac Quoc Anh, Director of the Institute of Economics and Enterprise Development, said 39% of enterprises have never heard of ESG (Environment, Society, Governance). He also said that many initiatives are "sponsored" by VCCI, but 65% of small and medium-sized enterprises do not know where to register to receive support for green development.
Even with existing policies, businesses are afraid to implement them. For example, with plastic bags, according to Circular 152/2011, this is a taxable item at a rate of 40.000 VND per kg. This rate will increase to 50.000 VND in 2018, according to Resolution 579. However, Ms. Do Hong Hanh - General Director of Buyo said that the price per kg of plastic bags on the market is currently around 30.000-40.000 VND. That is, the selling price is below the tax rate, making it difficult for biodegradable bags to replace plastic to compete on price.
According to the roadmap, Vietnam will reduce production and import of small, hard-to-decompose plastic bags from the beginning of 2026, which is an opportunity for alternative materials to plastic. Recently, Buyo launched a line of bags that do not contain petroleum-based plastic, do not contain microplastics, are durable and easily decompose in the environment in 3-6 months. However, Buyo's CEO said they are hesitant to offer them to supermarkets, as the selling price is 2-3 times higher than cheap plastic bags that are flooding the market. Currently, they mainly distribute to mid-range and high-end retail chains.
"If we have a green policy and strictly implement it, we can completely compete on par with regular plastic," said Ms. Hanh, and at the same time recommended that the Government have a stronger policy to reduce and eventually eliminate plastic, especially single-use plastic.
In addition, she proposed a public procurement mechanism that prioritizes environmentally friendly products over price. Bidding mechanisms that prioritize price put great pressure on green businesses, because their production costs cannot currently compete with traditional plastic products, due to the lack of economies of scale. "The public sector can set an example, prioritizing green products in public procurement, thereby creating a trend of using environmentally friendly goods," said Buyo CEO.
Regarding green capital, Alternō representatives hope that the Government will establish a financial incentive mechanism and provide capital quickly. For example, Vietnamese enterprises have been granted quick access to green loans with preferential interest rates of less than 2030% per year by prestigious international organizations such as the Partnership for Green Growth and the Global Goals 4 (P9G) - an initiative of 6 countries, including Vietnam, to promote green growth - investment by prestigious international organizations. Alternō is also on the list of startups receiving funding from P4G this year.
Raising a startup is no different from growing a tree, but the ecosystem in Vietnam has only stopped at the "sowing" stage, according to a representative of Yeast Era. "Meanwhile, germinating seeds will need good soil to take root and policy light for photosynthesis," Yeast Era's technical director likened, adding that nurturing and caring will produce large businesses many years later.
According to the: VnExpress