Vietnam: Micro-finance services remain limited as demand increases

Jun 2007
Vietnam, June, 06 2007 - Although micro-finance programmes exist in most cities and provinces throughout Vietnam, they have yet to meet all the financial demands of low-income earners, according to a recent seminar in HCM City.

The seminar on Vietnamese micro-finance sustainably operating in the legal framework, acknowledged that the programmes remained modest in both scale and influence.

At present, about 4mil households have taken advantage of the service, far below demand.

Micro finance is the provision of small loans at low interest to poor households for the better utilisation of their limited resources.

Experts told the seminar that demand for programmes was increasing as the population rose, most of it in rural areas.

Those at the seminar agreed that micro-finance programmes for the poor would help create a sustainable Vietnam and guarantee that all would benefit from the nation's economic development.

The State Bank of Viet Nam said micro-finance was important because it offered finance to the poor, who were unable to tap into other financial avenues.

Improving access to credit services created jobs and developed household economic activities. This had proved an effective poverty elimination measure, according to Nguyen Thi Hoang Van, Managing Director of the Capital Aid Fund Employment for the Poor (CEP) under the HCM City's Labour Union.

At present, the CEP has 14 branches, half of which were set up by an Australian-sponsored project. Of the US$4.5mil donated, $3mil was for credit programmes and $1.5mil for upgrading CEP activities.

Dang Thanh Binh, Deputy Governor of the State Bank of Vietnam, confirmed in the seminar that the State Bank wanted to assist micro-finance development by developing a new legal framework for its activities.

Micro-financial organisations had difficulty keeping pace with international standards and in meeting the new Vietnamese legal framework for financial resources, competition, and labour, said Ta Duong Thuong, a CEP official.

The seminar put forward four key measures to develop micro-finance to better serve the community. These were the building of organisations capable of micro-finance activities, the building of a sustainable financial capability that met international standards, developing capital resources and diversifying the range of micro finance services to eliminate hunger and poverty.

The Fund for Green Futures in Quang Binh Province, for example, said the diversification of services would help its customers and its own independence by providing more practical and effective loans.

The main micro-financial service suppliers in Vietnam include the Bank for Social Policy of Vietnam, the bank for Agriculture and Rural Development of Vietnam and poverty elimination projects.

CEP loans

CEP issues small credits of up to VND7mil ($430). The average loan time is 10 months, but times are flexible. The service has already proved successful in improving the lives of low-income earners.

Nguyen Thi Hoang in HCM City, a woman burdened with an old mother and three mentally-disabled younger siblings, borrowed VND2mil ($125) from a CEP branch in the 8th District. She used it to buy a sewing machine to do outwork and earned VND20,000-30,000 ($1.3-1.9) a day, enough to look after her family.

"Before the loan, I faced a lot of difficulties borrowing at high-interest rates from banks. The CEP loan has helped me a lot with its low interest rates and support from the branch," Hoang said.

Another family in District 8 used VND6mil ($375) loan from CEP to buy a Chinese motorbike for 'xe om'. Added to money made from her children selling lottery cards, the family can not only afford the one per cent monthly interest rate and pay for sending one child to school, but has also saved VND600,000 ($38) per month for the due date.

In three years, a total of 40,000 loans have been made nationally, sometimes two or three times to the same family. About 60% of households received loans for animal husbandry and another 15% for home crafts.


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