Evaluation of the credit activities for poor households in the vietnam bank for social policies ha nam branch

The study employs 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

Policies – Ha Nam Branch

Graduate Student: Luong Thi Phuong

Supervisor 1: Dr Mai Anh

Supervisor 2: Assistant Professor Chih-Hsu

Lunghwa University of Science and Technology

Approval Certificate of Master's Degree Examination Board

This is to certify that the Master‟s Degree Examinations Board has approved the thesis Evaluation of the credit activities for poor households in the Vietnam Bank for Social Policies – Ha Nam Branch published by Ms Luong Thi Phuong in the Master Program of Graduate School of Department of Business Administration

Master‟s 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 – Ha Nam Branch

Pages: 77

University：Lunghwa University of Science and Technology

Graduate School：Department of Business and Management

Date：December, 2016 Degree：Master

Graduate Student：Luong Thi Phuong

Advisor 1： Dr Mai Anh

Advisor 1：Assistant Professor Chih-Hsu Wang

Keywords: Credit activities, poverty eradication, preferential interest rates, Vietnam Bank for Social Policy

The study employs 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

statement and credit performance reports By reviewing the results from previous 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 households The results from the study implementation demonstrate the achievement in lending activities of VBSP Ha Nam over the observed periods as well as the limitations of the credit procedure Based on the thesis findings, the author has proposed some of the feasible solutions to improve the quantity together with the quality of the credit aiming at poverty eradication in VBSP Ha Nam

I also 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

Having obtained the results of this study, I have received comments from teachers in the International School of Vietnam National University, Hanoi with all the dedication of provided information from the entire departments, organizations and the poor households in

Ha Nam branch I would like to acknowledge these help

Despite many efforts, this thesis is inevitability of shortcomings Therefore, I expect to receive the valuable guidance and comments from all teachers and friends

Thank you!

Author

Luong Thi Phuong

TABLE OF CONTENTS

ABSTRACT i

ACKNOWLEDGEMENTS ii

TABLE OF CONTENTS iii

LIST OF TABLE vii

LIST OF ABBREVIATIONS viii

INTRODUCTION 1

1 The necessity of the thesis 1

2 The objectives of the thesis 2

2.1.General objective 2

2.2.Specific objectives 2

3 Subject and the scope of the thesis 3

3.1 Subject 3

3.2 Scope 3

4 New contribution of the thesis 3

5.Thesis structure 3

CHAPTER 1: OVERVIEW, LITERATURE REVIEW AND REALITY OF CREDIT PROVISION TO POOR HOUSEHOLDS IN VBSP 5

1.1 Overview of the examined topic 5

1.1.1 The reseach on credit provision to poor households in VBSP 5

1.1.2 Studies on credit assessment for poor households in other branches of VBSP 6

1.1.3 Results and gaps of the research 7

1.2 Fundamental literature review of credit and poverty 8

1.2.1 Fundamentals of credit 8

1.2.2 Fundamentals of poverty 9

1.3 Credit content for poor households 14

1.3.1 The role of credit for poor households 14

1.3.2 Characteristics of credit activities for poor households 15

1.3.3 Influencing factors 15

1.4 Indicators of credit performance for poor households 17

1.4.1 Method of lending 17

1.4.2 Objectives of the loan 23

1.4.3 Credit limit and the number of lending households 24

1.4.4 Interest rates on loans 26

1.4.5 Term of the loan 27

CHAPTER 2: METHODOLOGY 28

2.1 Research questions 28

2.2 Research Methodology 28

2.2.1 Documents collection method 28

2.2.2 Data processing and synthesis method 30

2.2.3 Document analysis method 30

2.2.5 Expert consultation method 31

2.3 Key indicators used in the study 31

CHAPTER 3: LENDING PROCEDURE FOR POOR HOUSEHOLDS IN VBSP HA NAM 33

3.1 Overview of Ha Nam Province 33

3.1.1 Geographical features 33

3.1.2 Weather climate 33

3.1.3 Land and the use of land 33

3.1.4 Socio-economic characteristics 34

3.2 Poverty status and characteristics of poor households 39

3.2.1 Characteristics of the interviewed poor households 41

3.2.2 Status of the member and labor of the household 43

3.2.3 Land status of surveyed households 43

3.2.4 Properties status of interviewed poor households 43

3.2.5 Participation in social unions 44

3.2.6 Income levels of interviewed households 45

3.3 Analysis of credit activities of poor households in VBSP Ha Nam 45

3.3.1 Method of lending 45

3.3.2 Objectives of loans 48

3.3.3 The number of loans and lending households 50

3.3.4 Interest rates 51

3.3.5 Loan maturity date 52

3.3.6 Lending results for poor households of VBSP Ha Nam 53

3.3.7 Results from the use of loan 56

3.3.8 The necessary support combined with the VBSP lending policy to improve the effectiveness of using loan 59

3.4 Evaluation of credit activities for poor households VBSP Ha Nam 59

3.4.1 Assessment the suitability of the loan method 59

3.4.2 Assessment of the satisfaction levels of loan demands 60

3.4.3 Assessment of the level of response to loan capital 61

3.4.4 Assessment of the suitability of the loan terms 63

3.4.6 Assessment of the purpose of loan utilization 65

3.4.7 Evaluation of post-borrowing support 67

3.4.8 Assessment of the impact of credit on poor households in Ha Nam 68

3.4.9 General assessment of credit activities for poor households in VBSP Ha Nam 72

CHAPTER 4: SUGGESTED SOLUTIONS TO IMPROVE THE CREDIT QUALITY FOR POOR HOUSEHOLDS IN VBSP HA NAM 78

4.1 Strict control of loan procedures 78

4.2 Fulfill the demand of the borrowers 78

4.3 Raising loans to poor households 79

4.4 Maintain and stabilize preferential interest rates 80

4.5 Attach credit limit to loan purpose 80

4.6 Fulfillment of the lending demand timely for the business cycle of poor households 81

CONCLUSION 82

REFERENCES 84

LIST OF TABLE

Table 1 Land Use Statistics of Ha Nam Province Period 2014 – 2016 34

Table 2 Population and labor changes in Ha Nam province 2014 – 2016 35

Table 3 Producing results of Ha Nam province from 2014-2016 37

Table 4 Proportion of poor households in Ha Nam province 40

Table 5 General information on interviewed poor households 42

Table 6 Number of households lending for money in 2014-2016 51

Table 7 Loan terms under different programs and purposes 52

Table 8 Some key indicators of credit activities in VBSP Ha Nam during 2012-2016 53

Table 9 Authorized loans through socio-political organizations at VBSP Ha Nam on 31/12/2016 56

Table 10 Debt collection turnover of poor household loans in VBSP Ha Nam during 2012-2016 57

Table 11 Overdue loans of poor households at VBS Ha Nam Province for the period 2012 - 2016 58

Table 12 Poor household assessment of loan procedures 60

Table 13 Loan levels of interviewed poor households with loans from VBSP 62

Table 14 Loan terms and assessment of poor households 64

Table 15 Interest rates and assessments of poor households on preferential loan rates 65

Table 16 Use of loans by poor households 66

Table 17 Income levels and income changes of poor households borrowing money 71

Table 18 Indicators reflect the access and impact of credit to poor households in Ha Nam 76

LIST OF ABBREVIATIONS

LISWD Labor-Invalids and Social Welfare Department

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, during the period

of the market economic transformation, the effects of it on different areas and group of citizen are not equal Therefore, there is a part of the society 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 effects on the stability of the politics, economics and the environment, the Communist Party of Vietnam (hereafter known as the Party) and the government has confirmed the importance of the close relationship between economic growth and the progress of the society Therefore, 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 Vietnam as well as other developing nations Until now, the national strategy for the development of society and the eradication of the poverty has achieved some certain success and gained the approval of people which has significantly contributed to the stability of the politics and attracted the foreign investments It is undeniable that 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 fundamental solutions not only in Vietnam but also in other developing countries According to the recent inquiry, over a half of the households who are provided credit 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

Credit business, especially the part for the poor has contributed considerably for the eradication of the poverty in social life and the Vietnam Bank for Social Policies (VBSP) is the official financial institution which takes a crucially important role in the poverty elimination mission of the whole banking system Although significant efforts 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 credit line, credit

terms which still encounters enormous limitations and are required to be more suitable depending on the subjects, purposes and the effectiveness of the lending Therefore, the results are not adequate to the efforts of the relative parties and the effectiveness are relatively low

As above requirements, on the 4th of October, 2002, the Prime Minister signed the Decision 131/TTg to establish VBSP to reorganize the former Vietnam 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 10th

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 other nationwide branches of VBSP, VBSP Ha Nam targets at the beneficiary of social welfare, especially the low-income which occupied 23.41% of the current customers and 27.47% of the outstanding loans in 09 different lending programs It can

be seen as the right policy of the government that 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 effective in implementing the poverty eradication policy of the government in both the nationwide scope and Ha Nam province, I conduct the research “Evaluation of the credit activities for poor households

in the Vietnam Bank for Social Policies – Ha Nam Branch” to be my main topic for master thesis

2 The objectives of the thesis

2.1.General objective

To assess the credit procedure for poor households of VBSP Ha Nam, then suggesting some solutions to improve the lending activity and the effectivenesss of the loan usage

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

About the term: The research is conducted from 2012 to 2016, so that the figures in this thesis are 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 examined location

The reality and solutions in this thesis is suggested in the basis of investigating, evaluating the current lending procedure 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 improve the credit quality for poor households in VBSP 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 households as well as other beneficiaries of social welfare have been studied within the local scope and of the whole country Among the studies related to poor household credit management at the Vietnam Bank for Social Policies, the following papers are the most remarkable:

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

- "Credit for the Poor and Poverty Eradicating Funds in Vietnam" (2002), by Nguyen Trung Tang This thesis is about credit issues for the poor and funds for the purpose of reducing poverty level in our country during the operation of Vietnam Bank for the Poor

- Duong Quyet Thang with the article "Complete the savings and loan model to contribute to effective 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 out of commercial credit, encouraging all of the people to participate in poverty eradication and help to reduce 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 social and political organizations, as long as they are poor households and other beneficiaries who wish to borrow from VBSP By the end of 2012, the country had 200,000 SLGs In fact, there are many different types of SLG and are organized flexibly However, the existence of different types of SLG, various 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 improve the model of SLG

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

"Solutions to improve credit efficiency for poor households 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 households 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 role of the Party, local governments and take full advantage of the direct guidance from the Party and the authorities at all levels; Secondly, VBSP and other socio-economic organizations need to have close, consistent and open coordination from the basis, creating opportunities for the poor and other beneficiaries of social welfare to access financial and banking services Thirdly, to regularly carry out the propaganda and dissemination of lending policies for poor households Fourthly is the preliminary review, timely encouragement Fifthly is to regularly improve the level of staff of VBSP, capital managers of organizations, associations and SLGs The sixth is implementing administrative procedures reform, simplified procedures, loan applications to create favorable conditions for the beneficiaries which allows them to 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 of Nghe An province under the 30A Program" (2014), a master of economics thesis by Nguyen 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 VBSP 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 can be summarized 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 entrusted 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 education, increasing sense of discipline, enthusiasm, professional ability, communication as well as creating trust for customers which can be seen as the decisive factors for success

- "Management of preferential loans to support the poor at the Social Policy Bank of Yen Khanh district, Ninh Binh province" (2014), the master thesis on economics of Vu Thi Lan In this work, the author systematizes the theoretical and practical basis for the management of preferential loans and assesses the situation of preferential loan management at VBSP Yen Khanh At the same time, it proposes some key measures to effectively manage the preferential loans to support the poor in Yen Khanh district, Ninh Binh province The solutions are as follows: (1) Improving the self-control in mobilizing capital 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 agricultural expansion and vocational training for poor households

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 households, 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 in both the headquarters and local branches The studies have also tried to find effective solutions to enhance the efficiency of credit management for poor households at VBSP It can be seen as valuable resources for the author to refer to in the course of this thesis

1.1.3.2 Gaps of the research

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

poor households in VBSP Ha Nam Therefore, the thesis "Evaluation of the credit policy for poor households in the Vietnam Bank for Social Policies – Ha Nam Branch" aims at filling the gaps

1.2 Fundamental literature review of credit and poverty

1.2.1 Fundamentals of credit

1.2.1.1 What is credit?

Credit is an economic concept that reflects the relationship between lenders and borrowers In this relationship, the lender is obliged to transfer the right to use the money or goods to the borrower for a specified period of time When the lender is due for repayment, the borrower is obliged to repay the amount or value of the goods The loan 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 credibility among parties

Credit is also an economic phenomenon that arises in the context of commodity production The emergence and development of the credit not only aims at satisfying the need for regulating capital in society but also as an impetus for economic growth Recently, credit has been seen as an important instrument for the strategy of poverty eradication

1.2.1.2 The nature of credit

Credit can be seen as an economic category which is operated in variety 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 with a greater value The difference is called as the credit 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 diversely The formation and development of credit is

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

- Based on the form of loan, it can be in cash or in kind

- Based on the subjects of the credit relation, it includes commercial credit, bank credit, government credit and international 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 the supervision and management of the different levels of government Orthodox credit plays a key role in the credit system of a nation

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

1.2.2 Fundamentals of poverty

1.2.2.1 Definitions and concepts of poverty

There have been numerous different perspectives on poverty so far, since poverty can be considered as a dynamic state It changes in space and time with the starting point is the growth of production and the economy derived from the increase in human needs which leading to the changes of society

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

Absolute Poverty: Absolute poverty is a phenomenon that occurs when the

income or consumption of a person or household falls below the poverty line (often 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 venue Therefore, relative poverty is defined as those who live below acceptable standards in certain locations and times

These are people who feel deprived of what most people in society enjoy Hence, benchmarks for relative poverty often vary from country to 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, it is the relative poverty to attract attention from the authority in order to find solution that are capable of narrowing 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 different communities in a region

Poverty issues are often associated with distribution and income 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 know how to work so it is undoubtedly

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

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

Secondly, the poor are also human beings, also born with equal rights to others However, 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 to overcome 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 business which results in asset losses leading to poverty

1.2.2.2 Characteristics of the poor

Poverty can be seen in almost every part of the society However, in general, unwealthy people are featured by the following traits:

Firstly, nearly 80% of the poor work in farming and live in rural areas

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' educational level lowers their income from assets and other resources which also prevents them from finding better jobs in high-paying industries According to the author Do Thien Kinh, the probability of poverty could reduce by 2% if people increase the schooling time for one year Meanwhile, the author Kim Thi Dung, while studying the roles of microfinance in poverty alleviation in the northern mountainous provinces, suddenly discovered that many poor people cannot sign in the credit contracts They can only have their signature by pressing the finger-print instead

Thirdly, the poor often own little or no land or other assets, which makes them

more difficult to access and cannot take advantage of external opportunities

Fourthly, poor households tend to be family households with a high proportion

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

to Dr Do Thien Kinh, in 1998, each mother in the poorest quintile had an average of 3.5 children, compared with 2.1 children in the richest quintile

Fifthly, the majority of the poor live in remote rural areas which are easy to be

influenced by natural disasters and the infrastructure is relatively underdeveloped Because of their very low 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 potential catastrophe

1.2.2.3 Criteria for identifying poverty

It can be subjective to find an instrument to quantify the incidence of poverty because of the variety in identifying the number of poor people Within a country there

are numerous different standards, even among different regions, there are also a lot of

points of view

It is now common in the world to use two specific measures to quantify the incidence of poverty Most studies use poverty rate data based on the income standard

of 1 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 each country and region, it is best to use the poverty line of that country

*The poverty views in Vietnam

In Vietnam, beyond the scope of measuring and recognizing the extent and 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 policies, programs and solutions to eliminate poverty

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

No 09 on 30th of January, 2011 of the Prime Minister to serve for this research purposes In the period from 2016 to 2020, the poverty line is defined as follows:

- Poor households:

Mountainous rural areas below 700,000 VND/person/month

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

- Near poor:

Rural area near poverty: 701,000-> 900,000 VND/month

Urban area near poverty: 901,000-> 1,300,000 VND/month

1.2.2.4 Causes of Poverty

Poverty in our country can be the consequence from many reasons, both

objective and subjective The main reason is due to lack of experience, but also

because of the risk and social evils

Poverty is the consequence of many groups of factors such as lack of capital,

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

 Group of causes by the poor themselves:

+ Lack of capital for production: This is the main cause, lack of capital often 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 limiting the development of production and improve the quality of life

of poor households

+ 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,…These difficulties make it impossible for the poor to improve their educational level, and they

do not have the conditions to apply scientific 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 disease are also factors that push people into severe poverty + Land is less cultivated; landlessness is on the increase

+ Lack of jobs, not actively looking for work, lazy On the other hand, as a result 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 from the center, the weather is harsh, where frequent droughts, floods, epidemics It is also because they often live in remote areas where transportation is difficult to access and their goods are often sold cheaply (due to transportation costs) or unsold, and the quality of goods is reduced due to the lack of traffic

 Group of causes due 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, floods, droughts, epidemics, barren land, less cultivated land, complex terrain, difficult transportation, lack of infrastructure are the regions with the poorest households

1.3 Credit content for poor households

- Credit for poor households providing microfinance services is mainly credit and savings Banks often claim that small loans and savings are not profitable, and so 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 costs (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 financial support they can be better off Poor people 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 offsetting costs, including risk, revenue 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 non-subsidized, profitable organizations

- The method is built for each individual or group of involved customers 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 interest - usually the economically 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

- Credit for poverty alleviation provides a large amount of financing to large 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

sustainable credit institutions - primarily credit and savings - that is provided to people working in agriculture, aquaculture, trades, providing services on a small 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 from characteristics of poor households, credit activities for poor households have the following basic characteristics:

- Method of lending: Because the borrowers are poor households with low qualifications and low assets, they should lend money through local socio-political organizations which can be seen as a bridge between poor households to borrow money from the Social Policy Bank, and helpers for very low interest rates, as well as the traders, supervisors of the loan usage of the household

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

- The term of the loan is medium and long term

- Interest rates are more preferential than commercial rates

- Debt collection (including the principal) is carried out regularly to limit 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 income

- There is no collateral for the loan but it is insured by the trust of local political organizations

socio The time before and after loans are very important for poor households Loans are often linked to technical, material and information support

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

households in a timely and continuous manner, it is vital having policies to guide investment capital in which areas in each period, dealing with risks in time for poor households, the loans are easy to promote high efficiency Products of poor households,

in case there is a good market, are easy to consume profit and high capital efficiency and vice versa Therefore, if the State has proper policies, timely support poor households in production and marketing of products, it can contribute to the effective use of capital The state must invest in infrastructure, including the construction and upgrading of rural roads, irrigation works and markets Supports for agricultural production includes the provision of new seeds and other agricultural materials, extension training, so that the poor have the necessary conditions to use capital effectively

1.3.3.2 Factors related to the organization of lending activities for poor households

of VBSP

Poor households are labor-intensive but lack production materials, they have no access to capital to carry out their economic programs Now, VBSP is providing loans with preferential interest rates However, in order to provide preferential loans to poor households in addition to low interest rates, VBSP lending should be smooth and simple and must be carried out in 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 so that lending to poor households 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 currently mainly poor households and policy beneficiaries Poor households often lack many things in which intellectuals, business and production can lead to the effect 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 If the poor households are conscious of using the capital for the right purpose, they will have good results in production and husbandry However, at present,

in some areas with special difficulties, remote areas and ethnic minority areas still have the feeling of self-reliant, waiting for the assistance of the State Some households are poor due to poor awareness, misuse of capital, failure to pay debts (principal, interest) to banks on time

1.3.3.4 Factors related to the support and coordination of socio-political organizations

In order to provide loans to poor households and other policy beneficiaries, VBSP has signed contracts on entrusting loans with socio-political organizations from the central to local levels such as Woman Union, Farmers Union, Veteran Union and Youth Union to 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 that fulfill their responsibilities, enthusiasm and responsibility will help to make public and democratic loans, the right beneficiaries and poor households will be guided carefully, thoroughly in completing the loan application In the process of borrowing capital, when problems arise, socio-political organizations, together with VBSP, find solutions to overcome It can be said that the support and coordination of socio-political organizations is an important factor affecting the efficiency of preferential loans for poor households

1.4 Indicators of credit performance for poor households

1.4.1 Method of lending

Article 5 of Decree 78/ND-CP stipulates that the provision of loans by the Social Policy Bank shall be carried out by mode of entrustment to credit institutions, socio-political organizations under the entrustment contract or Direct loans to Borrowers Accordingly, VBSP is simultaneously applying two types of lending: the mode of entrusted lending and the method of direct lending

1.4.1.1 Method of entrusted loan

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

to carry out certain tasks in the lending process agreed upon in the joint 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 entrustment fee set by the Ministry of Finance

 Conditions to perform the entrusted loan

- For borrowers:

+ 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:

+ Having network to village; Have prestige among people, have credibility with VBSP

+ Being able to propagandize, inspect and supervise the implementation of preferential credit policies of the State and VBSP's professional lending process

+ Having knowledgeable staffs of VBSP's lending profession, trained professionally to carry out the contents of entrusted work

 Loan application file includes:

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

- List of households requesting VBSP loan (Form 03/TD)

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

- Borrowing book

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

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

 Loan process

LENDING PROCEDURE DIAGRAM

The lending procedure is as follows:

Step 1: When applying for a loan, the borrower writes the loan application form

and the loan application (sample 01/TD) to the SLG On the loan request, the borrower must write fully and clearly the contents as required and with the signature of the borrower

Particularly for loans for job creation of households, which are funded by provincial-level People's Committees and capital sources managed by socio-political organizations, borrowers no longer have to make additional forms No.01/TD

Step 2: Organizing the association to direct the SLGs to hold meetings to review

the poor, near poor and other eligible beneficiaries, to make a list of households requesting loans Form 03/TD shall be submitted to the commune-level People's Committee for certification

These are very important steps, "Identifying the right borrowers." Therefore, the managing association must closely direct the SLGs so that the assessment meets the requirement of "public, fair, democratic and objective, the right subjects" In order to do this well, before the meeting, leaders of the village and mass organizations should thoroughly understand the following groups:

+ The borrowed households must be the right beneficiaries according to the regulations in each loan program

(1)

Lending

Household

Savings and Lending Group

People’s Committee at Commune Level VBSP

Social workers

at Commune Level

(7)

(6)

(2) (8)

(3)

(5)

(4)

+ 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 capital level, appropriate loan term and must be agreed by all members

+ The review to avoid the situation of rejection, resulting in wrong lending objects, loans cannot promote the effectiveness of discrediting the association, social organizations and VBSP affect the results of using loans

+ Team members should be responsible for direct involvement with each borrower so that borrowers and borrowers are not properly aware of the preferential credit capital

Step 3: SLG submits loan application file for credit officers to monitor 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 Committee

Note: Before submitting the loan profile of the Group to the credit officer for monitoring the commune, the team leader must carefully 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 photocopy copies)

Step 4: The Credit 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 to 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/TD to the CPC

Step 5: Upon receiving notice of loan approval form No 04/TD of VBSP,

People's Committee at commune level directly 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

to help them use the loan effectively At the same time, to arrange security forces in coordination with VBSP to ensure safety for the disbursement

Step 6: Receive 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 from VBSP, the association will capture these disbursement groups to monitor, supervise and instruct the loan user groups to use the capital efficiently and to take 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 time by groups of groups so that the members can receive money on time 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 leader must be specific 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 full capacity for civil acts to receive the money (the authorization paper must be certified by the commune-level People's Committee) Bring your identity card of the person authorized to receive money

Step 8: The bank disburses funds directly to the borrower at 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 initiative in arranging such tasks as loan application, debt collection, interest collection (if applicable) to prepare the required amount of disbursement, related papers, working facilities The director assigns the responsibility of each team member to be clear and suitable with the

expertise, capability and strength of each staff member During the work, the staff must

be self-conscious, serious and comply with the prescribed procedures

1.4.1.2 Method of direct lending

It is a form of lending in multiple times for the same group of customers who do not need regular loans and only borrow in case of need Each loan 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 Otherwise, for borrowers being economic organizations, the dossier sets shall include 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 dependent 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 loan; 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 commune where the project is implemented to confirm (In the case of direct lending to disadvantaged students, loan application form cum loan 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 case of no loan, VBSP 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 Security Contract and Credit

Agreement for disbursement The loan guarantee contract must be strict and must be certified by the State Notary Public Office or authenticated by the People's Committee

of the competent authority

- Notice for the participants in the loan process:

+ For borrowers: The borrowing project must 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

VBSP provided preferential loans to serve production 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:

 For poor households, households engaged in production and/or business on

islands, rural or mountainous areas or areas of communes, townships, urban districts in cities or centrally-run cities, for the following purposes:

- Procurement of supplies 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 learning

 For economic organizations in the islands, in rural areas, mountainous areas or areas of communes, towns, suburbs and cities under central government loans to cover costs of production and business under the chapter submitted or approved by the competent authority

 For students in difficult circumstances, using loans to purchase educational facilities and other expenses for studying at the school

 The purpose of lending is to policy beneficiaries to work abroad for a fixed term, using loans to pay for training costs, service charges, deposits, airfares

1.4.3 Credit limit and the number of lending households

The credit limit for each poor household is determined based on: borrowing 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

2 Lending for poor households at 64 poor districts 10/household

3 Lending for poor households in accommodation 25/household

4 Lending for poor households to build the places for

sheltering from storm, floods in the Middle of Vietnam 15/household

5 Lending for the near poor households 50/household

6 Lending for households just upper the poverty line 50/household

7 Lending for students in difficulty

1.25/month (according to the studying years)

8 Lending to create, support and expand employment - 50/person

- 1000/project

9 Lending for work training of the workers who just lost

land

Depending on each case

10 Lending for the program of clean water and rural area

11 Lending for poor household and the ethnic minority who

cross the limit as set

by government)

12 Lending for labor working in foreign countries under the

supportive program of the government

13

Lending to support the poor districts to foster the

production and to reduce sustainable poverty during period

of 2009-2020

As needed (not cross the limit as set by government)

14 Lending for the labor export to Korea 100/person

15 Lending for production and trades household in difficult

16 Lending for business at difficult areas - 100/person

- 500/organization

18 Lending for projects in developing the forestry 75% expenses

19 Lending for planting forests and raising cattle

Forest plant: 15/ha Raising cattle: 50/household

20 Lending for households of HIV, people after rehabilitation

and the rehabilitated prostitute

- 20/person

- 30/household

21 Lending for project IFAD and project RIDP in Tuyen

22 Lending for labor who lost land working in foreign

1.4.4 Interest rates on loans

Preferential interest rates for poor households are 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:

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

3 Lending for poor households in accommodation 0.25%/month

4 Lending for poor households to build the places for

sheltering from storm, floods in the Middle of Vietnam 0.25%/month

6 Lending for households just upper the poverty line 0.6875%/month

8 Lending to create, support and expand employment 0.1%/month

9 Lending for work training of the workers who just lost

10 Lending for the program of clean water and rural area

11 Lending for poor household and the ethnic minority who

12 Lending for labor working in foreign countries under the

13

Lending to support the poor districts to foster the

production and to reduce sustainable poverty during

period of 2009-2020

0.75%/month

14 Lending for the labor export to Korea 0.75%/month

15 Lending for production and trades household in difficult

16 Lending for business at difficult areas Specific regulation

18 Lending for projects in developing the forestry Specific regulation

19 Lending for planting forests and raising cattle Specific regulation

20 Lending for households of HIV, people after

rehabilitation and the rehabilitated prostitute Specific regulation

21 Lending for project IFAD and project RIDP in Tuyen

22 Lending for labor who lost land working in foreign

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 project, with taking into account the borrower's repayment capacity

Short-term loan: 12 months or less

Medium-term loans: from more than 1 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

2.2.1.1 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 levels (General Statistics Office, Statistics Office, Statistics Office)

+ 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, demographic, labor, land, assets, loan situation (source, through mass organization, how much loan, how much loan, loan term, interest rate, loan purpose ), income, aspirations, comments of the household

- Method of collection: To collect the above information, I used the sampling method (Random sample selection)

- The sampling method of this survey is the random sampling method Ha 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 favorable socio-economic conditions, convenient facilities, especially the transportation system is very convenient Ly Nhan district has fertile land, but mainly produces agriculture, and grows perennial crops such as rose trees, poor infrastructure, unfavorable traffic, etc On that basis, each 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 must represent villages in communes and towns

+ Ly Nhan district is the land formed in place and the alluvial 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 area); Colored land and industrial crops District labor lives mainly on agriculture, combining a number of traditional industries such as textiles, furniture production, making rice noodles, making bamboo shoots for export According to the survey report, the district has 43,526 households with a total population of 195,000 people (population

is 4.48); The total number of poor households under the new survey is 560 poor households, accounting for 1.28% of total households

+ Duy Tien district is the southern gateway of Hanoi and the most concentrated industrial zone of Ha Nam province However, this place is mainly developed agricultural production, especially rice and winter crops Duy Tien district has 30,890 households with a total population of 133,140 people (the population is 4.31); The total number of poor households under the new survey is 367 poor households of 1.19% of total households

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

to poor households to create multiple 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 result of the loan

+ Expectations of surveyed households

2.2.2 Data processing and synthesis method

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

2.2.3 Document analysis method

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