Luận văn evaluation of the credit activities for poor households in the vietnam bank for social policies ha nam branch

The study camploys fundamental statistics methodology to investigate the status of lending procedure in Vietnam Bank for Social Policy VBSP - Ha Nam Branch for poor households, using the

Evaluation of the credit activities for poor

households in the Vietnam Bank for Social

Policies — Ha Nam Branch

Graduate Student: Luong Thi Phuong Supervisor 1: Dr Mai Anh

Supervisor 2: Assistant Professor Chih-Hsu

Wang

Lunghwa University of Science and Technology

Approval Certificate af Master's Degree Examination Board

This is to certify that the Masters Degree Examinations Board has approved the thesis Evaluation of the ercdit activitics for poor houscholds in the Vietnam Bank for Social Policies — Ha Nam Branch published by Ms Luong ‘Thi Phuong in the Master Program of

Graduale School of Department of Business Administration

Masters Degree Examination Board

Board Members:

Advisor

Chair

Date 2018/03/09

ABSTRACT

Thesis Title: Evaluation of the credit activities for poor households in the Vietnam Bank for

Social Policies — [la Nam Branch

Pages: 77

University Lunghwa University of Science and ‘Technology

Graduate School : Department of Business and Management

Date : Decermber, 2016 Degree | Master

Graduate Student : Luong Thi Phuong

Advisor 1: Dr Mai Anh

Advisor 1 : Assistant Professor Chih-Hsu Wang

Keywords: Credil activities, poverly eradication, preferential itlerest rales, Vielnam Bank

for Sosial Poliy

The study camploys fundamental statistics methodology to investigate the status of lending procedure in Vietnam Bank for Social Policy (VBSP) - Ha Nam Branch for poor households, using the annual data collected from the conducted survey, bank income

stalomnenl and credit performance reporls By reviewing the resulls Gorn pravious papers as well as consulting the experts’ perspectives, this research divides the collected data into different categories including the lending procedure criteria, the content of loans the results

of the loan usage and the impacts on the Living of the poor houscholds The results from the study implementation demonstrate the achievement in lending activities of VESP Ha Nam

Talso would like to show my deep gratitude to my family, my friends, and those who

frequently ask for encouragement during the preparation of this thesis

Tlaving obtained the resnlts of this study, T have received comments fram teachers in the International School af Vietnam National Universily, Hanoi with all the dedication of

provided information trom the entire departments, organizations and the poor households in Ila Nam branch | would like to acknowledge these help

Despite many cfforts, this thesi

receive the valuable guidance and comments from all teachers and friends

is inevitability of shoricomings, Therefore, I expect to

Thank you!

Author Luong ‘hi Phuong

1.1 Overview of the examimed topic $

1.1.1 _ Thereseach on credit provision to poor households in VBSP Š

1.1.2 Studies on credit assessment for poar households in other branches of

1.2 Fundamental literature review of credit and poverty 8

1.2.1 Fundamentals o£ crecht HH1 kg tr re 8

1.2.2 Fundamentals of poverty

1.3 Credit content for poor households

1.3.1 The role of credit for poor houscholds, ieee ieee

1.3.2 Characteristics of credit activities for poor householdb

1.3.3 Influencing factors

1.4 Indicators of credit performance for poor houscholds

1.4.2 Objectives of the loan

1.4.3 Credit limit and the namber oŸ lending houscholds

1.4.4 Interest rates on loans

1.43 Term of the loan

CHAPTER 2 METHODOLOGY

21 Research questions

2.2, Research Methodology ¬— 1n

2.2.1 Documents collection method

2.2.2 Data processing and synthesis method

kẻ .13 Document analysis method

tà a

Experi consullation method

2.3 Key indicators used in the study, HH n0 0e rre

CHAPTER 3: LENDING PROCEDURE FOR POOR HOUSEHOLDS IN VBSP

3.2.1, CharacterisHcs of the interviewed poor hơuseholds

3.2.2 Status of the member and labor of the household

3.2.3 Land status oÏ sinveyed houscholds coi

3.3.4 Properties status of interviewed poor hơuseholds

4.3.5 Participation in sooial unions

3.2.6 Ticorne levels of imlorvicwed houscholds

3.3 Analysis of credit activities of poor households in VBSP Ha Nam

3.3.1 Method of lending

3.3.3 The number of loans and fending households

3.3.4 Tnlerest rates

3.3.5 Loan maturity date TH se

3.3.6 Lending resulis for poor hơuseholds of VBSP 11a Nam

3.3.7 Results trom the use of loan HH1 E002 m0 2 tre

3.3.8 The necessary support combined with the VBSP lending policy to

improve the effectiveness of using loan

3.4 Evaluation of credit activities for poor households VBSP Ha Nam

3.4.1 Assessment the suitability of the loan method

3.4.2 Assessment of the salisfaction levels of loan demands

3.4.3 Assessment of the level of response to loan capital

3.4.4 Assessment of the suitability of the loan terms

3.46 Assessment of the purpose of Inan utilization

3.4.7 Hvaluation of post-borrowing Support .ccccceesssssseeessssseeeesssesee

3.48 Assessment of the impact of credil on poor households in Ha Nam

3.4.9 General assessment of credit activities for poor households in VBSP Ha

QUALITY FOR POOR HOUSEHOLDS TN VBSP HA NAM

4.1 Strict control oŸ loan procedures 1n

4.2, Fulfill the demand of the borrowers 1n

4.3, Raising loans to poor houscholds 1n

4.4, Maintam and stabilize preferential inlerest raۤ co co

4.5, Attach credit limit to loan purpose

4.6 Fulfillment of the Iending demand limely for the business cycle of poor

CONCLUSION

‘Table 7 Loan teoms under difforent programs and pHiposes 52 Table 8 Some key indicators of credit activities in VBSP Ta Nam during

Table 9 Authorized loans through socio-political organizations at VBSP Ia

Table 14 Loan terms and assessment of poor households 6A

‘Table 15 Interest rates and assessments of poor households on preferential

Table 17 Income levels and income changes of poor households borrowing

Table 18 Indicators reflect the access and impacl of credil.o poor

households in Ha Nam — TH nh HH HH thư, 76

vũ

LIST OF ABBREVIATIONS

VBSP Vichm Bank for Soiai Poliey

SME Small and Medium Enterprise

LISWD Labor-Invalids and Social Welfare Department

viii

INTRODUCTION

1 The necessity of the thesis

Along with the innovation of the society, there are significant changes in the development of the economy and the social life of people, However, daring the period

of the market economic transformation, the effects of it on different areas and group of citizen are nat equal Therefore, there is a part of the saciety who cannot catch up with this change and encounter a lot of difficulties in both normal life and production, so that they gradually become the poor Due to the fact that poverty has negative ettects on the

stability of the polities, economics and the environment, the Comnmnist Party of

Vietnam (horcaftsr known as the Parly) and the goverment has confirmed the importance of the close relationship between economic growth and the progress of the society ‘herefore, it is considered the vital policy that poverty should be eradicated

“The elimination of the poverty is defined as the focus on the development strategy

of Vielnam as well as other developing mations Until now, the national stralegy for the development of society and the eradication of the poverty has achieved some certan success and gained the approval of people which has significantly contributed to the slabilily of the politics aud alfracted the forcign investments, TL is undeniable thal the States, the local government as well as the international organizations have been focusing to reduce the current level of poverty, in which credit provision can be considered as one of the fimdamental solutions not only in Vietnam but also in other developing countries According lo he recent inquiry, over a half of the houschelds who are provided eredit under this policy agreed that the lending aiming at reducing poverty has positive effects on them A lot of people have crossed the poverty line and

can afford to purchase more instruments for their work and consumption,

Credil business, especially the part for the poor has contrituled considerably for the eradication of the poverty in social lif: and the Vietnam Bank for Social Policies (VBSP) is the official financial institution which takes a crucially important role in the

poverly climination mission of the whole banking system, Although significant cffarts have been made in order to improve the lending procedure to make it easier for the poor households in accessing the credit, there are still a lot of issues from both the lenders

and the borrowers such as identifying the appropriate borrowers, the eredit line, eredit

terms which still encounters enormous limitations and are required to be more suitable

As above requirements, on the 4° of October, 2002, the Prime Minister signed the

Decision I31/TTg to establish VBST lo reorganize the former Viclnam Bank for the

Poor to provide credit for the low-income and other beneficiaries of social welfare

VBSP — Ha Nam Branch was established under the Decision 508/QD on May 10”

2003 of the Chairman of the VBSP aiming at implementing the credit policy of the government under the Decree 78/2002/ND-CP for the low-income and other

beneficiaries of social welfare

As olher nationwide branches of VBSP, VRSP Ha Nam targets al the beneficiary of social welfare, especially the low-income which occupied 23.41% of the curent customers and 27.47% of the outstanding loans in 09 different lending programs ít can

be seem as the right poliey of te government thai is advocated by the people However, the effectiveness of this policy still does not meet the objectives of the local government which affects the quality of the services for the poor

In the expectation that credit for the poor can be more effzetive in implementing the povarly cradication policy of the goverment in both the malionwide scope and Ha Nam provinee, I conduct the research “Evaluation of the credit aetivitis for poor households

in the Vietnam Bank for Social Policies — Ula Nam Branch” to be my main topic for

About the location: The research is conducied in Ha Nam branch

About the term: ‘The research is conducted from 2012 to 2016, so that the figures in

this thesis arc mainly from the beginning of 2012 to the end of 2016 and the suggested

solutions are for the later years

4 New contribution of the thesis

The thesis clarifies some certain content, literature review and reality related to the

credit incentives for poor households

The thesis also carries out research on the current situation and suggests some solutions to improve the effectiveness of the preferential credit for poor households in

the cxamined location

The reality and solutions in this thesis is suggested in the basis of investigating, evaluating the current lending procedue in VBSP Ha Nam, in order to improve the quality of the credit provision in the upcoming time

Chapter 2: Methodology

Chapter 3: Lending procedure for poor households in VBSP Ha Nam

Chapter 4: Suggested solutions to imaprove the credit quality for poor households in

'VBST Ha Nam:

CHAPTER 1: OVERVIEW, LITERATURE REVIEW AND REALITY OF CREDIT PROVISION TO POOR

HOUSEHOLDS IN VBSP

1.1 Overview of the examined topic

1.1.1 The reseach on credit provision to poor households in VBSP-

Poverty eradication and preferential credit for poor houscholds as welt as other beneficiaries of sovial welfare have been studied within the local scope and of the whole country Among the studies related fo poor household credit management at the Vicimm Bank for Social Policies, the following papers arc the most remarkable

- “Models for Social Policy Bank and Solutions to improve the operational officicncy of the Social Policy Bank" (2002), of Do Tat Ngoc The rescarch was carried out on the Bank of Social Policy models and solutions to improve the operational efficiency of the Policy Bank in general

= "Crodit for the Poor and Poverty Eradicating Finds in Victam" (2002), by

for the Poor

+ Duong Quyet Thang with the article "Complete the savings and loan modsl ta contribule to affective credit policy management.” The article reviews VBSP performance over 10 years of poverty eradication, improving the quality and effectiveness of policy credit, breaking policy credit ont of commercial credit, encouraging all of the people to participate in poverty sradication and help 10 1cduec lending on usury in rural areas, The article explores the model of Savings and Lending Group (SLG), members of the Savings and Lending Group, regardless also being members of other sovial and political organizations, as long as they are poor houscholds and other beneficiaries who wish to borrow from VBSP, By the end of 2012, the

comntry had 200,000 SLGs In fact, there are many different types of SIG and ars

onganived flexibly Tlowever, the existence of differenl types af SEG, varians mechanisms and levels of management lead to the inability to have a unified operational mechanism and to operate under certain standards In practice, there are issues in the

management of SLG Due to these above mentioned problems, the author suggests

some solutions to imprave the model of SLG

1.1.2 Studies on credit assessment for poor househelids in other branches of VBSP

Solutions to improve vrodil cfficicncy for poor houscholds VBSP - Thanh Hoa branch”, (2011), the thesis for Master of Economics by Le Thi Thuy Nga In this work, the author systematizes the fundamental theories of poverty and credit for poor households, analyzing, assessing the status and effectiveness of credit for poor houscholds of VBSP at Thanh Hoa province, and proposing solutions and recommendations to improve the credit effectiveness of poor households at VBSP Thanh Hoa The solution is proposed as follows: Firstly, VBSP should pay special attention to the rele of the Party, local governments and take full advantage of the direct guidance from the Party and the authonties at all levels; Secondly, VBSP and other

sucio-cconomic organizations need 10 have close, consistent and open coordination front the basis, creating opportunities for the poor and otter Loncficiaries af sovial welfare to access financial and banking services Thirdly, to regularly carry out the propaganda and dissemination of lending policies for poor households Vourthly is the preliminary review, Himcly encouragement, Fiflhty is lo ragudarly improve the level of staff of VBSP, capital managers of orgamzations, associations and SLGs, The sixth is

, loạn which allows them to

implementing administrative procedures reform, simplified proccdur

applications to crcatz favorable conditions for the beneficiari

easily access to preferential credit policy It can be seen as the sources of success in implementing the credit program

- "Management of credit activities at the VBSP - Nghe An branch for the districts af Nghe An provines under the 30A Program (2014), a master of cconomics thesis by Neuyen Van Hung In this work, the author systematizes the basic theoretical issues of credit and how it is operated while analyzing and evaluating the situation and management activities of VSP in various districts of Nghe An province under 30A Program, At the same time, the author proposes some solutions to improve the efficiency of credit management activities in Social Policy Banks in the examined districts The solutions ean be sumuarived as follows: Firstly, taking advantage of the orientation of the Board of Directors, VBSP Executive Board; the leaders of the Party, authorities at all levels, the active coordination of the trusteeship associations and

related branches, Secondly, the organization should implement well the method of partial entrustsd lending through socio-political organizations, Thirdly, administrating well at the branch level according to the principle: “Determination, centralization,

democratization and effectiveness” Fourthly is to regularly pay attention to the staff,

training and arranging the work reasonably, enhancing ideological cducalion, increasing sense of discipline, cnthusiasm, proftssional ability, conumunication as well as crcating,

trust for customers which can be seen as the decisive factors for success

- “Management of preferential loans to support the poor at the Social Palicy

Bank of Yen Khanh district, Ninh Binh province” (2014), the master thesis on sconomics of Vu Thi Lan In this work, the author systomulizes the theoretical and practical basis for the management of preferential loans and assesses the situation of preferential ioan management at VBSP Yen Khanh At the same time, it proposes some key measures to cfitctively manage the prefcrential loans to support the poor in Yen Khanh district, Ninh Bink province, ‘Ihe solutions are as follows: (1) Improving the selcontrol in mobilizing capilal to serve VBSP lending activity: (2) Effectively implementing the lending policy through local socio-political organizations, (3) Strengthening the control over the use of loans through socio-political organizations; (4) Increasing the flexibility in disbursement, (5) Combining providing loans with encouraging agrivultural expansion und vocational training far poor houscholds

1.1.3 Results and gaps of the research

1.1.3.1, Results of the research

The above mentioned studies have dealt with different aspects of credit management issues for poor houscholds, focusing on clarifying the roles, necessity and impacts of VBSP credit policy on poverty eradication while analyzing and evaluating the credit management activities for poor households int both the headquarters and local branches The studies have also tied to find efféctive solutions to enhance the efficiency of credit management for poor households at VBSP it can be seen as

valuable resources for the author lo roftr to in the course of this thosis,

1.1.3.2 Gaps of the research

There are existing gaps which can be seen as critical issnes of credit activity for

poor households in VBSP Ha Nam †herefore, the thesis "Evaluation of the credit

policy for poor houscholds in the Victmam Bank for Social Policies — Ha Nam Branch"

aims at filling the gaps

1.2 Fundamental titcrature review of credit and poverty 1.2.1 Fundamentals of credit

1.2.44 What is credit?

Credit is an economic concept that reflccts the relationship between lenders and borrowers In this relationship, the Jender is obliged to transtér the zight to use the money or goods to the borrower for a specified period of tims When the lender is due for repayment, the borrowar is obliged to repay the amount or valuc of the goods The Joan was accompanied by an interest

According to the economic aspect, in fact, credit is an economic relationship of the use of temporary unused capital between the borrower and the lender on the

principle of repayment which is based on the eradibilily among parties

Credit is also an economic phenomenon thal arises in the context af commottily production, The emergence and development of the credit not only aims at satistying, the need for regulating capital in society but also as an impetus for economic growth,

Recently, credit has been scer as an important instrument, for the strategy of poverly

eradication

12

The nature of credit

Credit can be scon as an cconomic catggory which is opsralcd in varicty of methods, It represents the relationship between two parties: the owner of the money or commodity used by others for a certain period of time and should be refunded to the owner wilh a greater value, The difference is called as the aredit income, The repayment

of both capital and interest is the characteristic of the nature of credit that distinguishes

it from other economic categories

Along with the development of the commodity economy, capital market has been developed dynamically and diverscly The formation and devalopmont of credit is

a unifying of many forms while each form relates to a specific socio-economic condition, they can complement sach other or may negate one another in the process of

+ Based on the form of loan, if ean be in cash or in kind,

- Bascd on the subjects of the crodit relation, it includes commercial credit, bank credit, government credit and intemational credit

- Based on the method that credit is provided, it is divided into orthodox and unorthodox credit

Orthodox credit can be considered as the publicly-listed financial institution under Ihe supervision and management of the different levels of government, Orthodox

credit plays a key role in the credit system ofa nation

Unorlledox or informal credit is the eredil grated by individuals, institutions outside formal credit institution system, based on a given principle between the lenders and the borrowers to avoid credif risks

1.2.2, Fumdamentals of poverty

1.2.2.1 Definitions and concepts af poverty

‘There have been numerous different perspectives on poverty so far, since poverly can be considered as a dynamic stale Tl changes in space and time with the

starting point is the growth of production and the economy derived trom the increase in hmman needs which leading tơ the changes of society

The Asian Development Bank has introduced the concept of absolute poverty and relative poverty as follows

Absolute Poverty: Absolule poverly is a phenomenon thal occurs when the income or consumption of a parson or honschold fills lelow the poverty Tine (olen defined as poverty) In detail, it is often defined as “A living condition characterized by malnutrition, boredom and illness that is below the reasonable level for a human being,”

Relative poverty: Relative poverty can be considered among social correlations depending on the accommodation and popularity of the living venus Therefore, relative poverty is detined as those who live below acceptable standards in certain Jocations and

‘times

‘These are people who feel deprived of what most people in society enjoy, Hones, benchmarks for relative poverty often vary fromm counlry 10 country or from region to region Relative poverty is also a manifestation of inequality in distribution and income

‘The assessment of poverty is highly dependent on the system of policies and development solutions of each place Nowadays, il is the relative poverty lơ attracl attention from the authority in order to find solution that are capable of naxrowing the gap between the rich and the poor In addition, consideration of relative poverty is significant when developing solutions for different groups of people in the community and in differen conmnanitiss in s region

Poverly issucs are oflcn associated with distribution and ieome, Uneven distribution and income often leads to increased poverty Hence, poverty eradication is closely linked to economic growth and social justice

‘There are currently two different perspectives on poverty:

Firstly, poor people are those who do not now how to work so it is undoubtedly

to be always resulted in fhilwres and therefore they need to be helped The point is likely

to look down and to despise the poor, to help them without trusting thom and limiting their potential ability

Secondly, the poor are also man beings, also born with equal rights to others

Jlowever, they cannot find the opportunity to do what the wealthy can do Poverty has

taken away human rights, so if the poor are given the chance 1o overcame poverty, they can do anything that people in less difficulty situation can do

The above view shows respect to the poor and placing their trust in them, so that

it enables them to contribute to the country’s economic and social development

‘As discussed, poverty can happen to someone when they do not have the

opportunity or conditions of doing business as others, but they bear the risk of doing

busin

s which resnlts in assot lossas loudlings lo poverty

10

1.2.2.2 Characteristics of the paor

Poverty can be seen in almost every part of the society However, in general, unweallhy people are fealured by the following trails

Firstly, nearly 80% of the poor werk in farming and live in tural arcas

Secondly, the poor often have narrower educational background than the majority of the population Statistics show that about 90% of the poor have only basic

or lower than the secondary education It is explained that poor households’ educationat

level lowers their income from ass

s and other resources which also prevents them fiom finding better jobs in high-paying industries, According to the author Do Thien Kink, the probability of poverty could reduce by 2% if people increase the schooling, tame for one year Meanwhile, the author Kim ‘I'hi Dung, while studying the roles of microfinanes in poverty alleviation in the northern mountainous provinees, suddenly

Fourthty, poor houscholds tend ta be farrity houscholds with a high proportion

of dependents, Large familics with only few employees are mostly the poor, According

to Dr Do Thien Kink, in 1998, each mother in the poorest quintile had an average of 3.3

children, compared with 2.1 children in the richest quintile

Fifhly, the majorily of the poor tive im remote mural arsas which wre casy lo bơ influenced by nahnsl disasters and (he inffastruchure is telalively underdeveloped Because of their very Jow and unstable incomes, they are unlikely to have savings and are also unable to cope with losses in bad harvest, from the unemployment, natural disasters, declining health and other polcutial catastrophe

1.2.2.3 Criteria for identifying poverty

Il can be subjective to find an instrument to quantify the incidence of poverty becanse of the variety in identifying the mumber of poor people Within a country there are numerous different standards, even among different regions, there are also a lot of

paints of view.

It is now common in the worid to use two specific measures fo quantify the

incidence of poverly Most studies usc poverly rale dala based an the income standard

of | USD/person/day Other studies use a change in the 20 percent of the poorest total

income as an approximate measure of the movement in poverty

‘Therefore, in the process of studying poverty, depending on the characteristics

of cach country and region, il is best lo usc the poverty line of thal cauntry

*The poverty views in Vietnam

In Vietnam, beyond Ihe scope of measuring and recogniviug the exten! anid magnitude of poverty, some of the more important objectives are to help formulate policies and programs for poverty eradication It is suitable for socio-economic conditions in general as well as regions and localities in particular

In addition, the poverty line is used as a means to monitor the implementation of the policics, programs and solutions to climinate poverty

Wilhin the framework of this research, I used the poverty line under Decision

No 09 on 30" of Jammary, 2011 of the Prime Minister to serve for this research

purposes, In the period fiom 2016 to 2020, the poverty line is defined as follows

- Poor households

Mountainous rural areas below 700,000 VND/persowmonth,

Urban area is less than 900,000 VND/person/month

- Near poor:

Rural area near poverty: 701,000-> 900,000 VNDémonth

Urban area near poverty: 901,000-> 1,300,000 VNDimonth

1.2.2.4, Causes of Poverty

Poverty in owr county can be the consequence from many reasons, both

chị

tive and subjective The nmin reason is duc fo lack of experience, bat also

because of the risk and social evils

Poverlyis the consoquenice of amy groups of factors anch as tack af capital,

underemployment, lack of knowledge, lack of land, but ultimately, it can be divided inlo the following groups:

% Group of canses by the poor themselves:

+ Lack of capital for production: This is the main causc, tack of capital oflen fall

into vicious circle, poor production, not enough to eat, have to rent, have to borrow to

ensure the minimum daily living, It can be said: Lack of capital production is the biggest obstacle Himiting the development of production and improve the quality of life

of poor houscholds

+ Lack of experience and knowledge of farming: Traditional cultivation methods are deeply ingrained in the subconscious, self-sufficient production is the main, often living in remote areas, difficult transportation, lack of mean, illiterate children, "'hese difficulties make it impossible for the poor lo improve Ihvir educational tevel, and they

do not have the conditions to apply scientitic and technical advances to cultivation, their lack of experience and their low level of production leads to the inefficiency in daily works

+ Poor health and discase arc also factors (mal push poople into severe poverty

+ Lamd is less cullivated; landlessness is on the increase

| Lack of jobs, not actively looking for work, lazy On the other hand, as 4 resull of the war leading to many people losing their labor, many widowed women lead to a lack

of labor or a lack of young, healthy workers capable of undertaking hard work

+ The risks in life as the poor often live in remote places, far stom the center, the weather is harsh, where frequent droughts, floods, epidemics It is also because they often live in remote arcas where transportation is difficult to access and their goods arc often sold cheaply (due to transportation costs) or unsold, and the quality of goods is reduced due to the lack of traffic

4 Group of causes dine to social and natural environment

“The harsh natural conditions have profoundly affected the agricultural production of poor households The extreme climatic areas such as natural disasters, foods, droughts, zpidemics, barren land, less cultivated land, complex terrain, difficult transportation, lack of infrastructure are the regions with the poorest houscholds

1.3 Credit content for poor households

- Credit for poor households providing microfinance services is mainly credit and savings Bariks oflen elainn that small loans and savings aro nol profitable, and sa they are not interested in these small groups, This gives room for private credit development, especially in the countryside Private commercial services are available for large borrowing ensts (because of high interest rates) for borrowers, especially the poor Non-governmental organizations and non-bank financial institutions have developed methods of providing appropriate credit to low-income borrowers

- ‘The subjects of poor household credit policy are the poor, mainly those who have low or no income, if given the firancial support they ean be betlcr off Poor peaple often have many different ways of making a living: farming, aquaculture, forestry, industry, services, trading, recycling, hired labor

- Credit institutions for poverty eradication are sustainable financial institutions

Financial sustainability is reflected in offselting costs, inelnding risk, revenne growth, stimulus savings, monitoring and support in the use of credit, increased efficiency in the use of funds This organization is often a multi-functional organization of borrowers in collaboration with banking, social and development organizations Microfinance has made up for all the costs and risks of nor-subsidized, profitable organizations

- The method is built for cach individual or group of iwolved cuslomers Credit for poverty eradication is usually provided for each household or household group, for households with certain conditions to generate income, be willing to pay on loans and inlerest - usually (he øeonomdcally poor, for the group of clients especially the extremely poor, through credit and savings groups,

- Credit for poverty eradication provides financial services right in the area where borrowers and saving people live, attracting more people, reducing credit costs and increasing the savings of the community

+ Credil for poverty alleviation pravides a large amount of financing to lange clients through multifunctional financial institutions that provide financial services to millions of customers, with far reaching, implications

1.3.1 The role of credit for poor households

Credit for poverty eradication is usually a small-scale financial service of

14

sustainable credit institutions - primarily credit and savings - that is provided to people working in agriculture, aquacullure, trades, providing services on a stall scale, Credit for poverty eradication is also a service that is appropriate to the financial characteristics

of the poor

1.3.2, Characteristics of credit activities for poor households

Derived ftom characteristics of poor households, credit activities for poor households have the following basic characteristics:

+ Method of lending: Because the borrowers are poor households with Taw qualifications and low assets, they should end money through local socio-political organizations which can be seen as a budge between poor houseliolds to borrow money from the Social Policy Bank, and helpers for very low interest rates, as well as the

traders

upetvisors of the loan nsage af the household,

- The amount of loan is small, the loan amount is only several tens of million

= The term of the Joan is medium and long term

- Interest rates are more preferential than commercial rates

= Debl collection (including the principal) is carried out regularly Lo linnit the risk

to the lender, monitoring the use of funds, supporting mechanisms, and raising the awareness of the borrower when using the capital to do business and to generate

‘The State intervention in the economy is an important factor for economic

stability and development Proper and timely regulation of the State will help the economic environment to be healthy, or vice versa, which will cause market disruption

To provide the State with policies to support capital for the poor cormmmes and poor

households in a timely and continuous manner, it is vital having policies to guide inveshnont capital in which arcas in cach period, dealing with risks in tite for poor households, the loans are easy to promote high efiiciency, Products of poor households,

in case there is a good market, are easy to consume profit and high capital efficieney and vice versa, Therefore, if the State hus proper policies, tincly support poor houscholds in production and marketing of products, it can contribute to the cfftetive

use of capital ‘Lhe state mmust invest in infiastructure, including the construction and

upgrading of tural roads, irtigation works and markets Supports for agricultural production includes the provision of new seeds and other agzicultural materials, extension training, so that the poor have the necessary conditions to use capital offectively

13.3.2, Factors related to the organization of lending activities for poor households

of VBSP

Poor houscholds are fabor-inlensive bul lack production materials, thoy have no access to capital to carry out their economic programs, Now, VBSP is providing loans with preferential interest rates Llowever, in order to provide preferential loans to poor houscholds in addition to low interest rates, VBSP lending should be smuoth and simple and must be carried out an a uniform manner Many poor households are now illiterate,

do not have identity cards, have no means of transportation, have no collateral to borrow and low intellectuals sơ thai lcnding to poor houscholds should be able to solve these problems, so that the loans for the poor households will be highly effective In addition, lending organizations have an important impact on the efficiency of preferential loans for poor households Therefore, the role of VBSP, with the conditions

of material talents, is important,

1.3.3.3, Factors related to poor households

Borrowers of VBSP are curently mainly poor households and policy beneficiaries Poar households often lack meny things in which intellectuals, business and production can load ta the effecl of limited production and business, producing in high cost, quality and low competitiveness that is difficult to overcome the risks in production and life Capital is mainly bank loans, not own capital, leading to passive production capital Lf the poor households are conscious of using the capital for the right purpose, they will have good resulls in production and husbandry However, at present,

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in some areas with special difficulties, remote areas and ethnic minority areas still have

the central to local levels such as Woman Union, Farmers Union, Veteran Union and

Youth Union io work with the bank during the loan process The support and coordination between VBSP and contracted political organizations is important in assessing the effectiveness of lending to poor households, Socio-political organizations thal fal fill their responsibilities, enthusiasm and responsibilily will help to make public

and democratic toans, the right boneficigrics and poor honssholds wil bơ guidod carefully, thoroughly in completing the loan application In the process of borrowing, capital, when problems arise, socio-political organizations, together with VSP, find solutions to overcome, Tl can be said thai the support and coordination of sovin-potitical organizations is an important factor affecting the efficiency of preferential leans for poor households

1.4 Indicators of credit performance for poor households

entrusted lending and the method of direct lending

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Method of entrusted lean

Loan delegation is understood as the entrusting party entrusts the entrusted party

to carry out cerlain tasks in the lending process agreed upon in the joinl document and

written agreement (if any), The mandatory is responsible for paying the fee to the

consignee at the agreed rate and is adjusted from time to time in accordance with the level of cnlrusiment fee set by the Ministry of Finance

% Conditions to perform the entmnsted loan

- For borrowers:

1 Must be a member of Savvy Accounts team;

+ Strictly obey the convention of the operation

- For the savings and loan group

+ Established and operating in accordance with Decision No 15/QD-HDQT dated March 3, 2013 of the Board of Directors of VBSP

| The management board is signed by the Social Policy Bank (MOLISA)

- For organizations, associations

| Ilaving network to village: Mave prestige among people, have credibility with

“© Loan application file includes:

- Loan application form cum loan use plan (Form 01/TD)

- List of households requesting VBSP Joan (¥orm 03/1)

- Announcement of loan approval results (Form 04/TD)

- Borrowing book

- Minutes of Savings Accounts (Form 10A/TD, LOC/TD)

The loan application file for the method of entrusted loan is gencrally applicd to all programs that carry out lending trust through association,

* Lown process

LEN DING PROCEDURE DIAGRAM

Lending Savings and

The lending procedure is as follows:

Step 1: When applying for a loan, the borrower writas the loan application form and the Joan application (sample 01/TD) to the 8LG Ơn the Joan request, the borrower must write filly and clearly the contents as required and with the signatwe of the

‘borrower

Particularly for loans for job creation of households, which are funded by

provineial-level People's Conunittees and capital sources managed by socio-political

organizations, borrowers no longer have to make additional forms No.01/1D

Step 2: Oxpanizing the association to direct the SLGs to hold meetings to review the poor, near poor and other eligible beneficiaries, to make a list of houscholds requesting loans Form 03/TD shall be submilted to the communc-level People's

Committee for certification

‘These are very important steps, "Identifying, the right bomowers.” Therefore, the

managing association must closely direct the SLGs so that the assessment meets the

roquiraunent of “public, fair, democratic and objective, the right subjects" Tn order lo da this well, before the meeting, leaders of the village and mass organizations should thoroughly understand the following groups

+ ‘The borrowed households mmst be the right beneficiaries according to the

Tagulations in each lean program

| Do not rake in the amount and the term of the loan

+ The purpose of each household's loan should be specific, appropriate to the needs of the capilal level, appropriate loan termn and must be agreed by all mertbers,

+ The review 10 avoid the

siluation of rejection, resulting in wrong lending objects, loans camot promote the effectiveness of discrediting the association, social organizations and VBSP aftzct the results of using loans

+ Team members should be responsible for direct involvement with each borrower so [hat borrowers and borrowers are nơi properly aware of the preferential credit capital

Step 3: SIG submits loan application file for eredil officers to manilor the location, including: Borrowing book, Form 01/TD and Form 03/TD, Form 10C/TD and

Form 10A/TD has been confirmed by the People's Committes

Note: Before submitting the Joan profile of the Group to the credit officer for monitoring the commung, the orm lesđe must carsfatly control (all relevant documents, not erased, deleted, Confirmation of the Commune People's Committee must be specific, with enough signatures, signatures and original originals, not Pholovopy copies)

Step 4: The Credil Officer receives the dossier and has the following tasks:

- Checking the validity and legality of the dossier In case the dossier is not in

compliance with the regulations, it shall have Jo guide the group to complete the dossier

- Submitting to the Director for approval the loan documents are complete and valid; Make a notification of sample loan approval number 04° D to the CPC

Step 5: Upon receiving notice of loan approval form No 04/1'D of VBSP, People's Committee at commun level dircetly inform the association and mass

organizations at commune level

The VBSP sent a notice to the People's Committee so that they could capture the investment capital of the commune and plan to direct relevant departments and agencies

lo help therm use the foun offectively Al the same time, to amange

coordination with VBSP to ensure safety for the disbursement

security forecs i

Step 6 Reecive notice form 04/TD from the Commune People’s Committee,

Association, mass organizations at communal level informed to SLG

Upon receipt of the disbursement notice fiom VBSP, the association will capture these disbursement groups to monitor, supervise and instruct the loan user groups to use the capital cfficiontly and to lake initiative in arranging the staff of the association and the leaders of the SLG to participate in witnessing the disbursement, In cases where many groups are disbursed in the commune, the association shall take the initiative in dividing the tine by groups of groups so thal the members can recive money om lime and avoid wasting time,

Step 7; SLG informs members/households of the loan amount of loans and time and place of VBSP disbursement

When informing the members, the Jeader must be specitic about the time and place and ask the household to bring along his/her identity card to receive money In cases where the borrower cannot travel, he/she must make a written authorization for another adult in the family with fill capacity for civil acts to receive the money (the aulhorivation paper tnusl be certified by the commune-level People's Committed) Frings

‘your identity card of the person authorized to receive money

Step 8: The bank disburses funds directly to the borrower al the commune

transaction office

In order for the disbursement to be most effective, credit officers who monitor

the area directly participating in the disbursement must take the inifiative in arranging

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axpertise, capability and strength of each staff member Dung the work, the staff must

be sel teonscious, serious and comply with the preseribed procedures

1.4.1.2 Method of direct lending

ILis @ form of lending in multiple times for (he sare group of customers who da not need regular loans and only borrow in case of need, Each Joan is separated into different profiles

Loan application documents

Depending on the specific borrower, VBSP will require the appropriate forms In case the client is a household (loan for job creation), the dossier set shall include only

the loan file Otherwis

for borrowers being cconomie organizations, the dossicr sols

shall inelude legal dossiers, economic dossiers and loan dossiers;

* Legal documents: business registration certificate, investment license authorization letter or loan guarantee issued by a competent higher level (if any) to a depondont accounting unit

* Economic document: financial reports for results of production and business in

the last 2 years and nearest period

* Loan application document: application form for Joan, project, production and business plan

In addition, the dossier also contains documents prepared by the VBSP and the same customers such as loan guarantee contract, evaluation form

‘The sequence of lending procedure is as follows:

Step 1 Customers formulate a project or loan proposal to the People's Committee of the commmme where the project is implemented to confirm, (In the case of direct lending to disadvantaged students, Joan application form cum Joan use plan submitted to the school for confirmation)

Step 2 Credit officers are assigned to directly appraise projects and plans The appraisal is implemented as instructed in the article "Credit appraisal of small businesses.” In casc of no Joan, VESP must make a form 04/TD sent to the borrower, the content of the notice stating the reasons for the refusal

Step 3 VBSP instructs customers to make Loan Secwity Contract and Credit Agreement for disbursement ‘The loan guarantee contract must be strict and must be

certified by the Stale Notary Public Office or authenticated by the Peaple's Cormiltec

of the competent authority

- Noiive for the participants in the loan proves:

+ For borrowers: The borrowing, project rnust prove the purpose of the loan, the effectiveness of the use of loan capital and must have relevant documents as prescribed

1.4.2 Objectives of the loan

YRSP provided preferential loans to serve produchon and business, to improve livelihoods, and to contribute to the implementation of the Program on Poverty eradication and Sustainable Social Employment

Depending on each policy beneficiary, VBSP has specified the purpose of lending as follows

4 Tor poor households, households engaged in production andor business on

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islands, rural or mountainous areas or areas of communes, townships, urban districts n cities or centrally-tun cities, for the following purposes

~ Procurement of suppties and equipment; varieties of plants and animals, payment for services for production and business,

- To contribute capital to carry out production and business projects approved by competent authorities;

- To satisfy a part of the essential needs of housing, electricity, lighting, clean water and learmmng

$ Vor economic organizations in the islands, in rural areas, mountainous areas or

1.4.3 Credit limit and the number of lending househalis

The credil timit, for each poor household is determined based on: barrowing demand, own capital and debt repayment ability of borrowers Each household can

borrow VBSP from time to time

Currently, VBSP is implementing 22 credit programs with each level of loan capital as follows

Unit: million VND

1 | Linding for poor honscholds 30/honsshofld

2 | Lending for poor households at 64 poor districts 10/honsehoid

3 _ | Lending for poor households in accommodation 25hơnsehoid

Lending for poor households to build the places for ,

4 | sheltering from storm, floods in the Middle of Vietnam (“household

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5 | Lending for the near poor houscholds S0¢houschold

6 _ | Lending for households just upper the poverty line 30housahold

1.25/month

7 | Lending for students in difficulty (according to the

studying years)

8 | Lending to create, support and expand employment ~ 1080xojeeL

ạ | Lending for work training of the workers who just lost Depending on each

10 Lending for the program of clean water and rural #62 144 conoid

hygiene

1 | Pending for poor houschold and the ethnic minority who

cross the limit as set

12, | Lending for labor working in foreign countries under the by government!)

supportive program of the government

Lending to support the poor districts to foster the As needed (not cross

13 | production and to reduce sustainable poverty during period the limit as sẽL by

14 | Lending for the labor export to Korea 100/pzrson

¡s | Lending for production and trades household in difficult 559 susehold

areas

16 | Lending tor business at difficult areas ~ 100/person ~ 500/organization

18 | Lending for projects in developing the forestry 75% expenses

Forest plant: 15/ha

19 | Lending for plinting forosis and raising cattle Raising cattle:

50/household

2g | Lending for houscholds of HIV, people aflor rehabilitation | - 20/person

;ị | Lenđing for project IFAD and project RIDP in Tuyen Specific regulation Quang provinee

Lending for labor who lost land working in forcign

1.4.4, Interest rates on loans

Preferential interest rales for poor houscholds arc decided by the Prime Minister for each period and are agreed on specific level within the boundary The specific lending rates will be announced by VBSP Specifically, the current interest rates of the

programs:

1 | Lending for poor households 0.55%/month

2 | Lending for poor households at 64 poor districts 0.275%/month

3 | Lending for poor households in accommodation 0.25%/month

4 | Lending far poor households to build the places for m

sheltering fiom storm, floods in the Middle of Vietnam 0.2594/monlh

3 | Lending for the near poor households 9.66%/month

6 _ | Lendig for households just upper the poverty line 0.6875%/month

7 | Lending for students in difficulty 0.59/month

8 _ | Lenđing ko ersalc, support and oxpand employront 0.194month

ạ | Lending for work training of the workers who just lost | azọ (áp

land

io | Lending for the program of clean water and rưai ara] se vạn

hygiene

11 | Landing for poor household and the ethnic minority who | 4 say noth

are labor export,

12 Lending for labor working in foreign counties under the 0.75%4/month

supportive program of the government

Lending to support the poor districts to foster the

13 | production and to reduce sustainable poverty during] 0.75%/month

period of 2009-2020

14 | Lending for the labor oxport fo Korea 0.75941monlh

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15 | Lending for production and tuades houschold in dition | 9 54h

areas

16 | Lending for business at difficult areas Specific regulation

17 | Lending for SME projects Specific regulation

18 | Lending for projects in developing the forestry Specific regulation

19 | Landing for planting forosis and raising exile Specific regulation

Lending for houscholds of HIV, people after

2 sciffe vegul

20 | rehabilitation and the rehabilitated prostitute Specifie regulation

py [Lending for project IFAD and project RIDP in Tuyen | eossc regulation

1.4.5 Term of the loan

The loan term is defined based on the borrower's lending objectives and the

repayment period of the program or projcet, with taking into account the borrower's

repayment capacity

Short-term loan: 12 months or less

Medium-term loans: from more than I year to 5 years Long-term loans: More than 5 years

2.2.1 Documents collection method

The information for the study was mainly collected from two sources: secondary

and primary

2.2.41, For secondary material

- Regarding the contents of the documents: the collected documents have

information suitable with the contents of the research subjects and related issues such

as;

+ Information on reason (concepts, roles, trends, influencing factors, policies .) + Practical information (domestic, regional, local)

+ Site information (natural, socio-economic, socio-economic performance )

- Resources: Documents collected through the following sources

+ Policy guidelines of the State

+ Theoretical books (textbooks, monographs, newspapers, magazines)

+ Statistics at all Ievels (Cneral Stalistics OMficc, Statistics Office, Slat

Offfice)

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| Scientific works (previous thesis)

+ Internet network

+ Report of departments and agencies of Phu Ninh district

These resources are used to refer to and to acquire properly in the graduation thesis

2.2.1.2 For primary material

+ The collected data reflects the following main contents’ qualification, dcmographic, labor, land, asscts, loan situation (source, through mass organization, how much loan, how much Joan, Ioan term, interest rate, loan purpose ), income, aspirations, comments of the household

- Method of collection: To collect the above information | used the sampling

method (Randorn sample selection}

- The sampling method of this survey is the random sampling method Ta Nam

province has 5 districts so to ensure my representatives choose 2 districts namely Duy

‘Tien district and Ly Nhan district representing the localities with different socio-

economic conditions, it will decide the purpose Use of loans, the impact of credit on

poor households Duy Tien district has tavorable socio-economic conditions, convenient facilities, especially the transportation system is very convenient Ly Nhan district has

fertile land, but mainly produces agriculture and grows parenntal crops such as rose

trees, poor infrastructure, unfavorable traffic, cle On that basis, cach My district selected 30 poor households, a total of 60 poor households on the List of poor

households managed by the Poverty Eradication Department These 60 households mst

represent villages in communes and towns

+ Ly Nhan district is Ihe land formed in place and tho allaviat soil of the Red River access, The land is relatively uniform, forming three different ecological regions the mudflats in the Red River and the Chau River; The lowlands (occupying 2/3 of the arcay, Colored land and industrial crops District Inbor tives mainly on agriculture, combining a number of traditional industries such as textiles, furniture production, making tice noodles, making bamboo shoots for export Aecording to the survey report, the district has 43,526 houscholds with a lotal population of £95,000 people (population

is 4.48), The total number of poor households under the new survey is $60 poor

houscholds, accounting for 1.28% of total houscholds

| Duy Tien district is the southern galeway of Tanoi and the rhost concentrated

industrial zone of Ha Nam province However, this place is mainly developed agricultural production, especially tice and winter crops Duy ‘Tien district has 30,890 houscholds with a totat population of 133,140 poopls (ihe population is 4.31), The tolal number of poor houszholds under the new survey is 367 poor households of 1.19% of total households

In addition, 1 also use other methods to collect primary information such as typical household screening methods, interviews wilh olher subjects involved in lending,

to poor households to create nmitiple channels and more information on the research

content,

- On how to collect; We interviewed directly for 60 poor households surveyed through questionnaires

- Contents of investigation:

| General information about the interviewee

+ General information about interviewed households

+ Investment and borrowing of households

+ Opinions of household survey on VBSP lending

+ The resuit of the loan

+ Expectations of surveyed households

2.2.2, Dala processing and synthesis method

Aller the investigation, a lot of information was collected, For (he information ta work, it should be arranged in a certain order When information is arranged in an appropriate firmat, it can be used to analyze the assessment most effectively

2.2.3 Document analysis method

On the basis of the synthesized material, | applied the statistical methods established to reflect and analyze the matcrial, with the following specific methods:

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