VIETNAM BANK

FOR SOCIAL POLICIES

Welcome to VBSP
 contents

Part I - Microfinance Landscape in Vietnam

Part II - General Introduction on VBSP

Part III - Achievement after over five year

operations

Part IV- Orientation of VBSP’s Operations

to 2010 - Vision 2020
The Financial Sectors in Vietnam

Financial Sector

Commercial finance

SME finance
Rural Finance Micro-finance

Agricultural finance
 Microfinance Market Demands
In Vietnam

24% Poor/LIHs

6% Upper poor HHs/NFMEs

Demand: Safe savings, remittances,
insurance, larger and longer term
investment loans

10 % poor HHs/MEs
Demand: Safe savings, insurance,
increasing loans w/ repayments following
ME cash flow.
8% Hungry/very poor
Demand: Safe savings and small lump loans
w/ small, frequent repayments and
Basic social services, business skills
 Demand for Financial Services

Small/ Business loans,

household payment
enterprise services,
(urban) insurance,
Income Level/ Enterprise Size

venture capital,
bank accounts,
Microenterpris loans for Consumption
e (urban) purchase of fixed loans, liquid
assets, term & savings,
current deposits
house
Poverty line
improvement
Microenterpris loans Income-
e (rural), generating
urban/ rural loans,
poor) emergency
credit, targeted
savings, micro-
insurance

Types of financial services

 Structure of the Microfinance market

Main providers:
High income segment (20%)

-4 JV Banks;
- 28 Foreign Banks; Mid level (56%) -5 SOCBs (VBARD)
- 36 JS Banks;
Full range of services (full range)

DAF (credit SOEs) - 17

insurance companies, including
BaoViet, and VSSA (insurance)

- 926People’s Credit -Postal Savings Service Comp (savings)

Funds + CCF (credit,
savings)

Poverty line The Poor and Low-

- Money lenders, trade finance (credit)
Income segment
-VBSP (credit and (24%; 74 % rural) - Ho/Hui/Phuong/SCGs (informal credit
member savings) and savings)

- MOs/INGOs
(semi-formal savings,
credit)
 The micro-finance sector
in Viet Nam

Formal Semiformal Informal

-- - Viet Nam Bank for - 57 international - - “Ho/Hui” ( a popular

Social Policies non-government from of rotating savings
- - Viet Nam Bank for and credit associations
organizations
Agriculture and Rural (ROSCA))
development
-- - Viet Nam Postal - 4 government – - - Relatives, friends,
Saving Company recognized micro- neighbours
-People Credit Fund finance
organizations - - Moneylenders
General Introduction
on VBSP
 The Board of Directors

2 Full time
General Director;

Board members
Head of Supervision Committee
of
Directors 12 other members: Vice ministers or
(14 Equivalent ranks from MPI, MOF, MOLI
12 part-time SA, MARD, SBV, Government Office,
members)
members Ethnics Committee, Vice chairman of
Farmer Union, Women Union, War Vete
ran Union, Youth Union
 VBSP organization structure

BODs

Supervisory
Consultants
General Director
Committee
Functioning Internal control
Departments & audit

Representative unit of Provincial Transaction Training

BOD at provinces branches Center Center

Representative unit of
BOD at districts District Transaction Offices
 VBSP establishment

VBARD
Bank for The Poor
VBSP

1995 2002

Time
 Network

Headquarters

01 Transaction center

63 provincial and municipal branches

609 district transaction offices

8,000 staff

9,300 mobile transaction points at
communes/wards

197.507 savings & credit groups
at communes/wards.

7,7 million active borrowers(households)

>2 million microsavers
 Credit Programs & targeted clients
Poor Households

Disadvantaged students

Job Creation program Owners

Migrant workers

Target Safe water supply and rural sanitation

Clients Business & production units with
drug-detoxified employees
Business & production households living in
specially disadvantaged areas and communes
Specially disadvantaged ethnic minority
households
Housing purpose at flooded areas
Others (Entrusted by donors or mandated
by the Government)
 Lending Models
Mountainous
Women Union areas

Rural
Youth Union areas

VBSP
Veteran Union Remote
areas

Difficulty
areas
Farmers’ Union

Direct – Partially Entrusted

 Customers’ selection

• Self-selected by the savings and lending groups:

“Labor capacity, healthy, micro-entrepreneurship”
• Verified by the Commune People Committee as
“ eligible poor”
• Approved by VBSP
 Monitoring on the selection
• The lists of the borrowers are publicized in Commune
Houses ( Full name, home address, outstanding loan,
savings...)

• Peer monitored by the Mass Orgs and local people

• VBSP and others (open)

 Incentive to Mass Orgs
F x AIC
Commission = x QR
LR

F=0.08%- fee ratio

LR= lending rate

AIC=Actual interest collected

QR= Rate associated with loan quality=100% if
late payment (LP) <5%; 80% if 5%<LP<7%: 50%
if 7%<LP<10%. 0% if LP>10%.
 Incentive to head of the group

0.085%
Commission = X ACI
LR

LR= Lending interest rate)

ACI= Actual collected interest
 Mass Organizations, Savings
& Credit Groups’ Role

Introduction of VBSP’s lending programs

Choosing target clients

Self-selecting borrowers

Collecting interest, savings from borrowers
and delivering to VBSP

Coordinating with VBSP in controlling,
supervising the loan, managing risk

Implementing combined supporting activities
 VBSP’s role

Directly signing credit contracts

Managing customers’ accounts,
making reports

Controlling, supervising the loans,
managing risks

Coordinating with local authorities
in technical assistance for clients to
use loans effectively
 Lending procedures

Approval

Commune People’s
Certification Committee

Credit & Savings

Borrower selection Group

Eligible borrowers
LENDING APPROACH
 Savings and Credit Groups

Formed by a mass organization

Member No.: 30-50/group or 10-15/group
in mountainous areas

Management Board:
+ Group Head, Accountant, Cashier.

Group Charter

Outsourcing contract by the VBSP

Facilitating the loan management and savings

Commission based activities
 Mobile Transaction Units

Distance less than 3 km

Customers can walk to the VBSP’ offices

100 % of communes
reached by VBSP

Distance more than 3 km

VBSP staff go to the communes
 Mobile Transaction Units
* Organization:
• Team Leader
• Accountant
• Cashier
* Functions:
• Disbursement
• Loan collection
• Loan review & supervision
• Risk management
• Application receipt
• Fees and commission payment
• Meeting with mass organizations
 Mobile transaction method

g ram
ro Mobile transaction at
cct. p
A communes

Tra
nsac
tion
da ta
 Advantages

Ready schedule for VBSP and borrowers

Updated situation of the loan

Publicized information for social supervision

Travel cost/ transaction time reduction for
the borrowers

Regular meeting with grassroots authorities

Dissemination of lending/savings procedures
 Savings mobilisation results
Unit: million VND

No of
Saving & No of SCGs
Total of Total of
Areas Credit Receiving Balance
receiving withdraw
Groups savings
(SCGs)
Northern
47,214 21,568 72,292 10,125 71,594
Uplands
Red River Delta 31,687 27,379 65,535 2,015 63,857
North Central 31,489 14,347 69,314 39,494 46,504
Central Coast 18,002 9,824 45,4296 6,086 44,463
7,316
Central Highland 14,505 7,106 659,188 18,087

Mekong River
32,623 13,271 42,959 6,612 49,065
Delta
Total 189,047 99,194 358,468 70,259 344,539
 ACHIEVEMENTS AFTER
OVER SEVEN YEAR OPERATIONS
(2003-2010)
 Banking operations
1.1. Structure of Funding sources
N Capital source structure Billion Million Rate (%)
o
VND USD

1 Charted capitals 10,000 500 11.4

2 Entrusted capital from Government 8,438 421 9.6

(state budget)

3 Capital mobilization from low interest 37,536 1,870 42.9

rate

4 Capital mobilization with market 26,103 1305 29.9

interest rate
Other capital
5 5,213 260 6.2

Total 87,290 4,356 100

 1.2. Lending activities
N Credit Programs Outstanding loan Number of
O
clients
Billion VND Million USD

1
Lending to the poor 35,398 1,769 3,698,683

2
Lending to disadvantaged students 23,676 1,183 1,694,976

3 Lending to production households in difficulty 10,084 504 525,219

areas
4 Lending to safe water supply and rural 6,730 336 1,116,056
sanitation program
5 Lending for job creation 4,267 213 291,884

4
Housing loans to the poor 1,362 68 181,828
 1.2. Lending activities (cont. )
N Credit Programs Outstanding loan Number of
O
clients
Billion VND Million USD

5
Lending to migrant workers 829 41 37,945
6 Lending to minor ethnic households in 376 19 76,632
special difficult areas
7 Housing loans in deferred payment in 588 29 70,193
Mekong Delta
8
Lending to Moutainous traders 279 14 7,471
9 Lending to Small and Medium Enterprises 192 9.6 593
(Funded by KFW)
10
Others 640 35.4 50,231
Total 84,421 4221 7,751711
 2.Institutional Development

Launching
Group Nationwide
Public Consolidation, Savings
Monitoring Training Printed Service
Development, Group for Receipts’ For the
Developing Strengthening Peak Issuance and Poor
Motivation
Transaction and Performance Procedure
& incentive
Network Points Consolidation Streamlining
for loan
at
Building Communes Management
quality

2004 2005 2006 2007 2008 2009 2010

 3.VBSP effect to poverty reduction
(Sept, 2010)

Approximate 2,000,000 poor households get out of
poverty

More than 2,100,000 new jobs created

The poverty rate reduced from 20% (2004) to
12,3% ( 2009)

More than 1,900,000 students can afford their
study by borrowing from VBSP
* 100 % of communes can access services of
VBSP.
Orientation of VBSP’s
Operations
to 2010 - Vision 2020
 Development Strategy
- Phase 1 : Transformation - effective
operation. By the year 2015 :
+ To strongly focus on operation self-
sustainability
+ To focus on credit risk management
+ To conduct procedure simplification
+ To improve informatics technology
infrastructure
+ To strengthen employee’s capacity
+ To improve service & product capacity and
access to clients.
 Development Strategy (cont.)
- Phase 2 : Transformation – Financial self-
sustainability. By the year 2020:

+ Self sufficient in funding

+ Excellent loan recovery
+ Streamlined operation and organization
+ Modernized IT system
+ Wide outreach and network
+ Innovative products and service
+ Productive & skillful employees
+ Capacity building for clients.
Strategy Plan Diagram
 Organizational Restructure

Reorganizing and strengthening the internal

audit apparatus

Strengthening the savings and lending groups

Flattening the organizational structure through
ICT application (District Transaction Offices
report directly to H.O)
 Portfolio Restructure

The break even and sustainable loans will be
increased

Wholesale loans to MFIs

More development of lending schemes but
sustainable based ones which targeted at
difficulty areas [Region II, III and specially
disadvantaged communes]
New Services

Savings

Remittance

Payment

Group based wholesale loans

Other group based services

Partnership based services

Capacity strengthening to partners