Vietnam’s banks are carrying a load its capital markets should share

Vietnam finances its growth through its banks to an unusual degree. The State Bank of Vietnam put the ratio of credit to GDP at 146 percent at the end of 2025, the highest among lower-middle-income countries, and expected credit to grow by about 19 percent over the year, against 15 percent in 2024.¹ On the narrower World Bank measure of credit to the private sector, the ratio rose from about 80 percent of GDP in 2014 to 125 percent in 2022.²

The level is closer to that of upper-middle-income Thailand than to Indonesia or the Philippines, whose private credit stands at a third to a half of GDP.² That depth has served Vietnam well in manufacturing and housing. Infrastructure is a different kind of borrower.

The difficulty is one of tenor. According to the central bank, about 80 percent of banks’ funding is short term, while about half of their lending is medium or long term.¹ Roads, railways, power plants and hospitals repay over fifteen to twenty-five years. Financing them from deposits that can leave within months exposes the banks to refinancing risk and the projects to sudden changes in the cost and availability of credit.

The regulator has moved in both directions. The cap on the share of short-term funds that banks may use for medium- and long-term loans was lowered over several years from 60 percent to 30 percent, a level that took effect in October 2023. From 1 July 2026, Circular 25/2026 raised it to 40 percent, explicitly to channel more long-term capital into infrastructure and industrial investment while the corporate bond market recovers.³ The change eases the constraint; it also concentrates more of the maturity risk on bank balance sheets.

Roads, railways and power plants repay over two decades. Most of the money lent to build them can be withdrawn within months.

Corporate bonds are the natural home for long-dated project debt, and the market is growing again. Issuance reached VND 575.4 trillion, about $21.8 billion, in 2025, up 11.3 percent on the previous year.⁴ Its structure is the weakness: 90.6 percent of issuance was privately placed.⁴ Private placements suit bank and corporate treasury needs but offer little of the disclosure, rating and secondary-market liquidity that pension funds and insurers require before committing to twenty-year paper.

$21.8B

Corporate bond issuance in 2025, up 11.3 percent

90.6%

Share of 2025 issuance placed privately rather than offered publicly

40%

Cap on short-term funds used for longer loans from July 2026, up from 30%

Listed equity remains small relative to the economy. Market capitalisation stood at 61 percent of GDP in 2025, below Malaysia at 103 percent and Thailand at 89 percent, and still under the 2021 peak of 76 percent.⁵ The FTSE Russell reclassification to secondary emerging status, effective from 21 September 2026, should widen the pool of foreign investors able to hold Vietnamese shares.⁶ A deeper market would let infrastructure developers and SOEs raise equity rather than leaning further on bank debt.

The constraint is not a shortage of domestic money. Gross savings reached about 38 percent of GDP in 2025, the highest among the large Southeast Asian economies.⁷ The task is to give those savings a long-term outlet other than a bank deposit: listed infrastructure funds, project bonds with public disclosure, and insurers and pension funds with the mandate and the instruments to hold them.

In our view, the decisive reforms over the coming years will not be the headline projects but the plumbing behind them: public bond issuance with ratings, a secondary market in which long-dated paper can be priced, and investment rules that let domestic institutions hold it. Until then, Vietnam’s banks will continue to carry a load that its capital markets should share.