How Income Diversification and Green Credit Program Affect Non-Performing Loans: Evidence From Vietnamese Banks

This research examines the impact of green banks and bank income diversification on the non-performing loans of 38 Vietnamese commercial banks from 2009 to 2023. We employ the Generalized Method of Moments to address endogeneity. Our findings suggest that greater income diversification reduces non-performing loans. Additionally, banks offer a green credit program that reduces non-performing loans compared to other banks. However, banks with higher income diversification levels and those participating in the green credit program have higher non-performing loan rates. The findings support the theories of green banking and bank diversification, as well as prior literature. The research offers practical implications for bank managers and policymakers on reducing non-performing loans in frontier and emerging countries.