Vietnam Bank Case Study
Overview of Vietnam Bank for Social Policies Micro-credit programmes
The Vietnam Bank for Social Policies (VBSP) was established in 2003, based upon the re-organization of the Bank for the Poor and separation from Vietnam Bank for Agriculture and Rural Development for the purpose of mobilising various resources domestically and internationally to perform the designated socio-policy lending programs of the Government. The bank provides subsidized and preferential credit to a wide range of target groups, including poor households, disadvantaged students, job creation, overseas workers, and household businesses in disadvantaged areas (VBSP, 2003). So far, the Bank has developed 18 loan schemes for the poor and other social policy beneficiaries.
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The mass organizations take responsibilities of some lending steps (e.g. establishing savings and credit groups, organizing certifying poor households, supervising and urging borrowers in using loans properly). VBSP themselves conduct loan disbursement, loan collection and safe treasury management.
Among different micro-credit programmes, lending to the poor households is the main one which constitutes approximately 81.2%, 52.3%, 40.4% and 36.5% of the bank’s loan portfolio in 2004, 2008, 2010 and 2012 respectively. There are several criteria that a household should meet to borrow from this programme (VBSP, 2003):
The household has a permanent or long-term residence permit at location of the
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However, to ensure high repayment rate, the process of lending and monitoring VBSP credit is rather stringent, which may turn out to make the VBSP’s mission of providing credit to the truly poor gets attenuated. To be more specific, because the repayment rate can affect the amount of funding that a VBSP branch can receive, each branch will try to keep their overdue outstanding loans as low as possible. Credit groups and the People’s Committee are also highly responsible for the repayment of credit group members, so they tend to exclude very poor households who might not be able to repay loans from the list of applicants (Dufhues et al, 2002). As a result, non-poor or even better-off households, who are expected to have higher capacity to repay the loans, can actually receive nominations from the commune authorities and get credits from the
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