Speaking yesterday at a conference on microfinance in HCM City, Dang Thanh Binh, deputy governor of SBV, said a large number of Viet Nam’s poor who in the past could not secure loans or financial services through legal channels had benefited the most from microcredit programmes.

Nguyen Thanh Tai, deputy chairman of HCM City People’s Committee, said earlier this year the Government issued a decision to create a legal framework to regulate the country’s microfinance industry.

More than 220 delegates from 60 international organisations and microfinance programmes located in more than 40 provinces attended the conference, whose theme was Making the Transition to a Financially Sustainable Vietnamese Microfinance Industry.

Unmet financial needs

Binh said the dominant provider of microfinance in Viet Nam was the State government, via the Social Policy Bank and the Bank for Agriculture and Rural Development.

However, these State microcredit programmes were insufficient to meet the demand for financial services of the poor, said Nguyen Thi Hoang Van, managing director of the Capital Aid Fund for Employment of the Poor (CEP) in HCM City, one of the country’s microfinance providers.

"Viet Nam is a developing country and the poor need to be able to access the basic benefits of this development," said Van. "This necessitates greater access to basic financial services."

The poor need money to start small businesses, repair their houses, and meet one-off expenditures such as school fees and medical costs, and pay for health insurance.

"The microfinance organisations were each founded to provide not only services needed by the poor but also micro-credit that offered the promise of something that other development programmes have had difficulty attaining and that is the promise of sustainability," Van said.

Microfinance, or microcredit as it is often known, enables the poor to borrow a small amount of money to generate income. It has been provided to more than 500,000 families in Viet Nam.

Legal framework

At the meeting, SBV representatives discussed plans to implement regulations that would govern the operations of microfinance institutions in the near future.

"The important thing is that compliance would enable us to formalise our operations so that we have a clear legal status and can increase our ability to expand outreach," said Van.

The legal framework, she said, would be very important because it "would better position CEP to mobilise funds and would help CEP’s expansion into neighbouring provinces."

CEP was established in 1991 as a non-profit social institution by the Labour Confederation of HCM City. It currently has 17 branches in the city where it serves 72,000 poor clients.

The Australian consul general in HCM City, Mal Skelly, said CEP was "a fine example of an effective microfinance organisation targeting the poor".

The Australian Government, through AusAID, has extensively supported microfinance in Viet Nam by offering loans and building the capacity of microfinance institutions such as CEP HCM City, CEP Ba Ria-Vung Tau Province and CEP Long An Province.

Skelly said the challenges facing the country’s microfinance industry included improving the legal framework and financial sustainability of microfinance institutions, and developing effective pro-poor financial products, as well as sourcing funds.

Source: Vietnam News