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Micro-finance institutions - An effective credit channel for the poor
Developing micro-finance is one of the Vietnamese government’s targets to help ease burdens on society. Micro-finance institutions have become an efficient credit channel for the poor.
Thanks to an initial loan of VND300,000 from the Micro-Finance Programme in Thanh Hoa province, Ms Lien in hamlet 9, Hoang Thinh commune, Hoang Hoa district has gradually expanded her business activities. Her total loans now reach more than VND3 million but she can pay back over 12 months. From importing materials to produce bamboo and rattan products for export, her family currently owns a shop to provide materials to many households in the commune while raising pigs and fish to make a good profit. Each month Ms Lien saves nearly VND700,000, enough to support two young children studying in town apart from building a new house near the road for business and production activities.
Ms Le Thi Loan, in hamlet 6, Hoang Thai commune, Hoang Hoa district, has so far borrowed VND1.62 million from the Micro-Finance Programme, also with a commitment on 12-month repayments. Her family now has a monthly earning of VND2.5 million from investment in raising geese, producing bamboo and rattan products for export.
The world’s leading micro-finance corporation Citigroup has offered a non-refundable package through Save the Children US to support the Micro-Finance Programme launched in Thanh Hoa province in 2001. The group has also provided VND3.3 billion to more than 10,000 low-income women in this province to start up business. Since last year, the programme has continued without support from foreign sources.
Addressing the Asia Microfinance Forum 2008 in Hanoi on August 26, former State Vice President Truong My Hoa affirmed that the development of micro-finance has helped to reduce poverty and eliminate hunger for many nations in the world.
The Vietnamese government considers the development of microfinance an important target because it helps lift social burdens for the state which finds it impossible to solve all issues relating to people’s credit. Mrs Hoa said microfinance institutions have become an effective credit channel for the poor. Thousands of microfinance organizations, including about 60 non-governmental organisations, are currently operating in Vietnam.
Vietnam now has three groups of microfinance organisations. They are (1) the official group, including a system of people’s credit, social policy banks, and the Bank for Agriculture and Rural Development, (2) the semiofficial group, including domestic and foreign non-governmental organisations and programmes by social organisations, and (3) the unofficial group, including personal forms of lending.
The Vietnamese government wants the poor to change from using unofficial financial services with high interest and risks to using credit services from official and semiofficial groups which are safer and more cost effective, Mrs Hoa stressed.
The establishment of semiofficial microfinance organiations has changed the face of financial services in Vietnam. Over the past 20 years, they have also served as an alternative channel besides the official sector.
Nonfinancial services have played an important part in these organisations with a wide range of activities like training basic business skills and providing knowledge of health care, nutrition, environment and sanitation to help the poor reduce their economic vulnerability.
However, these models have attracted the participation of only about half a million households in Vietnam, which is a small proportion out of the total families in need of these services. Mrs Truong My Hoa said: “Most of the poor in Vietnam have recently received loans this way once or twice but they still need to gain easier access to the services, including lending, saving and insurance.
VOV
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