Warm Greetings to all readers and wish you a good health from Vietnam Microfinance Working Group.

Transcription

1 FOREWORD Dear Readers, Warm Greetings to all readers and wish you a good health from Vietnam Microfinance Working Group. Year 2010 has been passing with many events important to the operations of the Vietnam Microfinance Working Group. With the strong commitments of group members and effective support from the State Bank of Vietnam, Asian Development Bank (ADB); Ford Foundation, Cordaid, ADA, SEEP network, International Labour Organization (ILO), Save the Children (SC), Planet, and many other international and national organizations, the Group has made remarkable achievements in its efforts to advocacy for a conducive legal framework, seeking funding, organizing training courses for capacity building, sharing information at workshops, updating the bulletins and the website. These activities are appropriate to the goals of developing a sustainable, professional and efficient microfinance industry in Vietnam. Over the few past years, Vietnam microfinance institutions have been busy transforming into professional entities under the legal regulations on microfinance operations in Vietnam. The dynamic industry has encouraged creative thinking on how management of microfinance institutions can improve to become more efficient and more sustainable providers of a diverse array of financial and non-financial products that holistically services the needs of the poor. According to recent observations, the rise of microfinance has brought about various innovations in the industry, especially in Asia. The success of new products and services has demonstrated how microfinance can be even more successful in alleviating poverty and assisting the poor if it is coupled with complementary products, greater accountability and transparency. The provision of financial and non-financial services has also become the foundation for thriving social enterprises and micro-enterprises. The Vietnam Microfinance Bulletin No.16 with the subject Microfinance products and services hopes to share useful information to the readers the development and implementation of new services and how microfinance institutions can gain from diversifying their product range so that they can respond best to the needs of the poor and low-income people. We would like to extend our sincere thanks to the organizations and individuals for contributing information, data and articles to the Bulletin and look forward to your continued support. The Editorial Team 2 VIETNAM MICROFINANCE

2 VIETNAM MICROFINANCE WORKING GROUP 4 When Is MIcrocredIt not the AnsWer? 6 evolution of MobIle banking services 8 financial services through post offices 9 business development services (bds) for MIcroenterprIses 10 customer protection MeAsures In MIcrofInAnce 12 IndIA MIcrocredIt faces collapse from defaults 16 MIcrofInAnce And hiv-infected people 18 effective savings service 20 loan products to the demand of the poor 22 MIcro-InsurAnce: sharing WIth ninh phuoc WoMen development support fund 24 citibank head upbeat About vietnam s MIcrofInAnce opportunities EDITORIAL BOARD Nguyen Bich Vuong Microfinance and development centre (M&D) Phan Cu Nhan vietnam bank for social policies (VBSP) Nguyen Tuyet Mai vietnam Microfinance Working group (MFWG) Victoria Van Save the Children (SC) Nguyen Ngoc Huong vietnam Microfinance Working group (MFWG) VIETNAM MICROFINANCE WORKING GROUP (MFWG) Add: Room 315, Building F4, Yen Hoa - Trung Yen building Area, Cau Giay dist. - Hanoi - Vietnam Phone: (84-4) Fax: (84-4) taichinhvimo@gmail.com Website: microfinance.vn designed by: esign.vn printed by: thuong Mai ttx vn company 3

3 B U L L E T I N N O. 1 6 WHEN IS MICROCREDIT NOT THE ANSWER? CGAP WHILE MANY POOR PEOPLE CAN BENEFIT FROM A MICROLOAN, NOT EVERYONE WANTS OR CAN USE CREDIT. TO USE CREDIT EFFECTIVELY, CLIENTS MUST BE ABLE TO GENERATE INCOME AT A RATE HIGHER THAN THE INTEREST THEY ARE PAYING. PROVIDING CREDIT TO THOSE NOT ABLE TO USE IT PRODUCTIVELY COULD PUSH ALREADY-VULNERABLE PEOPLE INTO DEBT. So what other services are available beyond credit? savings services can benefit most people, if their savings are safe. secure savings facilities provide a means to reduce vulnerability by allowing households to better manage their risk and cash flow. savings are an affordable way for poor families to accumulate money that can be used for investment. often, microfinance institutions may first need to transition to a regulated legal form in order to be allowed to offer deposits to the public. other financial services, such as remittances, insurance and pensions, are often sorely needed by poor people. for example, remittances are a significant source of income for many poor people. enabling cheaper, faster money transfer 4 VIETNAM MICROFINANCE

4 VIETNAM MICROFINANCE WORKING GROUP services would be a great benefit for many poor families who currently spend significant percentages of their earnings to move money. Moreover, many families could utilize insurance products and better pension delivery systems for greater social protection. safety-nets are transfer programs targeted to the poor or those vulnerable to poverty and shocks. some people refer to such programs described as social assistance or social welfare programs. they can provide relief to people hit by crises or who are chronically poor. displaced persons during or immediately following a conflict or those affected by natural disasters, such as earthquakes, famines and floods, are likely suited for targeted "safety-net" assistance that enables them to meet immediate consumption needs and replace lost assets. grants can be used to help people build assets, develop enterprises, and combat chronic poverty. grants may be suitable for post-crisis situations, as well as for assisting the chronically poor, retrenched workers, and high-risk groups with little work experience. conditional cash transfers are a popular way to structure grants. beneficiaries receive cash or some grant in exchange for important behaviors such as school enrollment/attendance or utilizing health services. small grants can also work well as first steps to "graduate" the poor from vulnerability to economic selfsufficiency. A successful example is brac s Income generation for vulnerable groups development program in bangladesh. this program has graduated more than 660,000 destitute women through free food, training, health care, and savings to mainstream microfinance. Investments in infrastructure, such as roads, communications, and education, provide a foundation for economic activities. communitylevel investments in commercial or productive infrastructure (such as market centers or small-scale irrigation schemes) can facilitate business activity. employment programs prepare the poor for employment and can promote income generation. foodfor-work programs and public works projects allow poor people to be functionally employed while contributing to improvement in infrastructure. In many cases, these programs may be out of reach for cash-strapped local governments but within the purview of large donors. non-financial services range from literacy classes and community development to market-based business-development services. While non-financial services should usually be provided by separate institutional providers, there are clear, complementary links with the potential impact of microcredit. for example, improved access to market opportunities can lead to more profitable, faster growth enterprises. legal and institutional reforms can create incentives for microfinance by improving the operating environment for both microfinance providers and their clients. for example, streamlining microenterprise registration, abolishing caps on interest rates, strengthening customer protection, loosening regulations governing non-mortgage collateral, strengthening the judicial system, and reducing the cost and time of property and asset registration can foster a supportive climate for microfinance VIETNAM MICROFINANCE 5

5 B U L L E T I N N O. 1 6 EVOLUTION OF MOBILE BANKING SERVICES By Fehmeen chronological list of some famous mobile money/mobile banking solutions that are highly popular amongst the masses in developing countries: Mobile commerce solutions have been around for over a decade, but their potential as a means of financial inclusion was only explored in 2004 when gcash was introduced in the philippines to transfer money and pay utility bills using airtime credits. According to the Independent, mobile money transfer was initially attractive as a safe, efficient and cheap means for poorer urban migrants to send remittances to their families in rural areas ; however, over time the service evolved to include a wide range of services that served different market segments in various parts of the developing world. Some Famous Mobile Banking Solutions for the Unbanked Population While mobile banking (and/or mobile money) solutions deliver utility to the banked population and offer huge development benefits to the poor or non-banked population as well. here is a 2004: gcash was launched by globe telecom in the philippines 2007: Mpesa was launched by safaricom in kenya (probably the most prominent mobile money solution for financial inclusion) 2009: MobileMoney was launched by Mtn in uganda 2009: Zap was launched by Zain in kenya 2010: easy paisa (easy Money) launched by telenor in pakistan 1. From Basic Financial Services, to While money transfer services are popular among mobile banking, over time, a variety of services such as purchase of airtime, purchase of goods and services, and payment of bills were offered as well. naturally, this required mobile network operators to integrate with third-party institutions, such as utility companies and merchants. (note: on the technical side, user- 6 VIETNAM MICROFINANCE

6 VIETNAM MICROFINANCE WORKING GROUP friendly interfaces were introduced and transactions were made more secure.) 2. Microfinance Services in Mobile Banking, and Then to A passive product offering was that of micro-savings customers began to store money in their mobile banking accounts realizing the safety and convenience it offered, and now, e-money is increasingly used as a savings vehicle. the next logical step was to integrate microcredit with mobile banking and M-kesho (by safaricom in kenya) as well as gcash (by globe telecom in the philippines) now disburse and collect loan payments to groups and individual microcredit clients. similarly, easypaisa (telenor in pakistan) is expected to follow the same path since the Mno entered the market after acquiring tameer Microfinance bank this collaboration between microfinance and mobile banking is a complicated one and not without its unique hurdles. 3. Remittances and Mobile Banking, and Finally to the international remittance market is worth $420 billion and 75% of this goes to the developing world (World bank figures from 2009) and most migrants rely on informal/illegal, costly and unsafe means to transfer money to their home countries. In this context, mobile banking services began handling international remittances as well, through banking channels as well as through money transfer operators (Western union, mcheck, dollar east, etc.). 4. Information Services for the Poor and Mobile Devices It soon became clear that the poor need more than financial services that information asymmetry was a hurdle in poverty eradication, which could be overcome through mobile phones as well. grameen foundation, google and Mtn teamed up to offer information services in uganda, in the area of health, marketplace prices and agriculture. the village phone business model offers similar benefits. 5. Disaster Recovery and Mobile Banking Solutions (this is not an official service, but needed to be mentioned nonetheless). because of the ubiquity of mobile banking, relief agencies are utilizing this channel to help victims of recent natural disasters (earthquake in haiti and floods in pakistan). Mobile banking solutions can be used to mobilize donations, generate savings, and disburse cash and credit so expedite the recovery VIETNAM MICROFINANCE 7

7 B U L L E T I N N O. 1 6 But why aren t there more examples of such success? Many postal networks are operated in highly inefficient ways, have high maintenance costs and face chronic deficits. poor management of postal banks and high levels of corruption lead to serious financial problems and even the need for refinancing. for example, mismanagement of postal deposits in cameroon, niger and senegal required refinancing, thus undermining the financial stability of the system. post bank refinancing can be extremely costly for the government. FINANCIAL SERVICES THROUGH POST OFFICES Valentina Saltane Providing financial services though post offices can increase access to finance and encourage people to use financial institutions. According to financial Access 2009, over 70 percent of countries use post offices to deliver financial services. In the russian federation, for example, the postal system processes 80 percent of all payments. postal financial services can expand financial access for a number of reasons, including good geographic penetration, especially in rural areas, high levels of low income clientele, existence of necessary financial infrastructure and low operational costs. however, there are just a few success stories involving provision of financial services through postal networks. In brazil, bank bradesco generated 1.5 million new accounts over 5 years by operating payment and savings services exclusively through the postal services. enabling professional financial service providers to use the postal branch network is associated with greater deposit account penetration and holds great potential for improving access In order to succeed, postal banks need to offer high quality, reliable and competitive services to their clients. If post offices cannot compete with commercial banks, they are likely to fail. for example, the postal savings bank of nepal did not succeed at attracting clients and expanding operations due to its inefficiency, technological shortcomings, and inability to provide electronic payment facilities. other impediments to providing financial services though post offices include the absence of postal sector policy and lack of coordination between financial and postal policies, which impedes the development of public/private partnerships. poorly managed and inefficient postal networks, narrow market orientation, inadequate accounting and cost allocation systems combined with regulations that limit diversification, asset management and investment autonomy are common in developing countries. In addition, post offices can be criticized for creating unfair competition for commercial banks as well as other financial institutions. policy makers need to address all of these issues to be able to use post offices as providers of financial services. but what an opportunity! (Source: CGAP) 8 VIETNAM MICROFINANCE

8 VIETNAM MICROFINANCE WORKING GROUP BUSINESS DEVELOPMENT SERVICES (BDS) FOR MICROENTERPRISES Victoria Van - Save the Children(SC) The question of whether microfinance is sufficient to generate poverty reduction or to help microenterprises reach their full potential; has sparked renewed interest in business development services (bds). Already an increasing number of microfinance institutions (MfIs) globally are providing bds to complement their range of financial products. While microfinance is a tool to help poor households establish income generating activities that can lift them out of poverty; sustainable development of microenterprises requires a greater array of nonfinancial services to develop the micro-entrepreneur s ability to grow their business. What is BDS? business development services (bds) is the provision of nonfinancial services. these services are aimed at providing assistance to start up business and to equip micro-entrepreneurs with the skills that will enhance their business management skills and understanding of market access strategies. Increasing the knowledge and ability of microentrepreneurs will lead to improved income generation and asset-building capacity. bds consists of a range of nonfinancial products that compliment financial services, including: 1. training and technical assistance: education and awareness, asset building, business management and Start Up Micro-Entreprise Small Micro- Entreprise Medium Micro- Entreprise Financial Services: microcredit, savings, insurance and other products and services Non-Financial Services: Training and technical assistance, access to markets, organization & management/ institutional development, etc entrepreneurial skills development, technical training (book keeping, inventory and financial management), counselling and advisory services (management and planning advice, business process improvements); 2. Access to larger markets: strengthened linkages between small microenterprises (smes) and larger enterprises (enterprise selection and diversification through joint ventures, sub-contracting arrangements), market development, trade fairs and exhibitions and improved marketing; 3. organization & Management/Institutional development: improved infrastructure, strengthening the capacity of micro-entrepreneurs in areas such as transport and delivery, money transfer and internet services; 4. Input supply: improving suppliers capacity to provide regular supply of quality inputs; 5. product development: technology transfer, quality insurance programs and design services; 6. Alternative financing mechanisms: the facilitation of supplier credit; 7. Improve networks: networking (building suppliers, customers and peer group to enable knowledge sharing); and 8. policy/advocacy: training in policy advocacy; policy studies. Continued on page VIETNAM MICROFINANCE 9

9 B U L L E T I N N O. 1 6 AN INTERVIEW WITH DAVID PORTEOUS, MANAGING DIRECTOR, RECAP INTERNATIONAL LLC, AND CGAP CONSULTANT CONSUMER PROTECTION MEASURES IN MICROFINANCE 1. Why is consumer protection important to microfinance? I believe that there are principled reasons and pragmatic reasons. Modern microfinance has been built on the foundation of serving the needs of poorer clients. protecting, not exploiting, these clients has been an important part. In this sense, microfinance has always been 'proconsumer', as beth rhyne, senior vice president of Accion, and others have said. however, as microfinance becomes more commercial and competitive in many countries, even those who do not subscribe to all of the original principles should see pragmatic reasons for ensuring that consumers are not exploited: for one thing, the effects of a political or popular backlash against 'exploitative lenders', which has been seen in various countries to date such as bolivia and south Africa, can be devastating, even to the good practitioners. 2. How can customers be protected? What are the main approaches (implemented in developed countries) microfinance may look into? A bedrock principle of consumer protection is transparency: that the terms and conditions of a contract should be clear and understood by consumers upfront. In some places, a standard basic credit contract must be used; in others, a standardized way of quoting the effective interest rate. of course, to give effect to this, consumers need to understand what they are getting into-hence consumer financial education is an aspect of consumer protection which is gaining increasing attention. on this foundation, in developed countries, consumer credit-related laws go further to prohibit certain types of behavior by lenders and require that safeguards be built into contracts. In addition, consumer protection regimes define ways in which consumer complaints and grievances against suppliers can be addressed effectively. this is because the conventional court system is usually not effective to handle relatively small consumer credit related issues. 3. What has been done to date in the microfinance sector to safe guard customers? this varies enormously by country, and reflects in part the approach to regulation in each country. south Africa is an example of a developing country which has perhaps gone furthest to date, first by setting up a microcredit regulator in 1999 which focused on consumer protection; and now with a new national credit bill, due to be passed this year, which would mainstream microcredit regulation and subject all forms of consumer credit to the same protection framework. At the same time, international networks like Accion and the Microfinance network have recently drafted and adopted pro-consumer pledges as a form of self-regulation by their members and affiliates in the countries in which they operate. 4. What are the pros and cons of state regulation versus selfregulation? self regulation is likely to be much more responsive to the requirements of an evolving industry; but it is often regarded as toothless-once a member is expelled from a selfregulating association, that member can often continue its bad practices with impunity. state regulation tends to be the flipside: much less flexible, but with the enforcement power of the state over all defined transactions 10 VIETNAM MICROFINANCE

10 VIETNAM MICROFINANCE WORKING GROUP or entities (although the enforcement power may be limited in fact to the capacity of the regulator, since other state agencies such as the police may be stretched implementing other priorities). then there are hybrids in between, such as south Africa's Microfinance regulatory council. Much depends on the stage of development of the sector and the extent, perceived or actual, of abuse as to which enforcement regime is appropriate. 5. What should policy makers and MFIs know before embarking on consumer protection measures? In many ways, this is a new issue in microfinance, although it is rapidly growing in importance. A big trap to avoid is rushing to regulate in this area of conduct regulation, just as in an earlier era of microfinance, cgap senior Advisor rich rosenberg and others counseled that there should be no rush to regulate MfIs prudentially. Another is avoiding importing inappropriate legislative models from other countries. there are few developing countries today with a well developed consumer protection framework, at least in microfinance. to consider only the well known developed country consumer credit codes such as in Australia, the uk or the us, without carefully assessing local circumstances could lead to outcomes which are perverse-for MfIs and their clients. David Porteous is a consultant in inclusive financial sectors to a range of clients, and the author of the new CGAP Focus Note No.27, "Protecting Microfinance Borrowers," May 2005 (Source: Microfinance MATTERS) A bedrock principle of consumer protection is transparency: that the terms and conditions of a contract should be clear and understood by consumers upfront VIETNAM MICROFINANCE 11

11 B U L L E T I N N O. 1 6 INDIA MICROCREDIT FACES COLLAPSE FROM DEFAULTS LYDIA POLGREEN và VIKAS BAJAJ INDIA S RAPIDLY GROWING PRIVATE MICROCREDIT INDUSTRY FACES IMMINENT COLLAPSE AS ALMOST ALL BORROWERS IN ONE OF INDIA S LARGEST STATES HAVE STOPPED REPAYING THEIR LOANS, EGGED ON BY POLITICIANS WHO ACCUSE THE INDUSTRY OF EARNING OUTSIZE PROFITS ON THE BACKS OF THE POOR. The crisis has been building for weeks, but has now reached a critical stage. Indian banks, which put up about 80 percent of the money that the companies lent to poor consumers, are increasingly worried that after surviving the global financial crisis mostly unscathed, they could now face serious losses. Indian banks have about $4 billion tied up in the industry, banking officials say. We are extremely worried about our exposure to the microfinance sector, said sunand k. Mitra, a senior executive at Axis bank, speaking tuesday on a panel at the India economic summit. 12 VIETNAM MICROFINANCE

12 VIETNAM MICROFINANCE WORKING GROUP the region s crisis is likely to reverberate around the globe. Initially the work of nonprofit groups, the tiny loans to the poor known as microcredit once seemed a promising path out of poverty for millions. In recent years, foundations, venture capitalists and theworld bank have used India as a petri dish for similar for-profit social enterprises that seek to make money while filling a social need. like-minded industries have sprung up in Africa, latin America and other parts of Asia. but microfinance in pursuit of profits has led some microcredit companies around the world to extend loans to poor villagers at exorbitant interest rates and without enough regard for their ability to repay. some companies have more than doubled their revenues annually. now some Indian officials fear that microfinance could become India s version of the united states subprime mortgage debacle, in which the seemingly noble idea of extending home ownership to lowincome households threatened to collapse the global banking system because of a reckless, grow-at-anycost strategy. responding to public anger over abuses in the microcredit industry and growing reports of suicides among people unable to pay mounting debts legislators in the state of Andhra pradesh last month passed a stringent new law restricting how the companies can lend and collect money. even as the new legislation was being passed, local leaders urged people to renege on their loans, and repayments on nearly $2 billion in loans in the state have virtually ceased. lenders say that less than 10 percent of borrowers have made payments in the past couple of weeks. If the trend continues, the industry faces collapse in a state where more than a third of its borrowers live. lenders are also having trouble making new loans in other states, because banks have slowed lending to them as fears about defaults have grown. government officials in the state say they had little choice but to act, and point to women like durgamma dappu, a widowed laborer from this impoverished village who took a loan from a private microfinance company because she wanted to build a house. she had never had a bank account or earned a regular salary but was given a $200 loan anyway, which she struggled to repay. so she took another from a different company, then another, until she was nearly $2,000 in debt. In september she fled her village, leaving her family little choice but to forfeit her tiny plot of land, and her dreams. these institutions are using quite coercive methods to collect, said v. vasant kumar, the state s minister for rural development. they aren t looking at sustainability or ensuring the money is going to incomegenerating activities. they are just making money. reddy subrahmanyam, a senior official who helped write the Andhra pradesh legislation, accuses microfinance companies of making hyperprofits off the poor, and said the industry had become no better than the widely despised village loan sharks it was intended to replace. the money lender lives in the community, he said. At least you can burn down his house. With these companies, it is loot and scoot. Indeed, some of the anger appears to have been fueled by the recent initial public offering of shares by sks Microfinance, India s largest forprofit microlender, backed by famous investors like george soros and vinod khosla, a co-founder of sun Microsystems. sks and its shareholders raised more than $350 million on the stock market in August. Its revenue and profits have grown around 100 percent annually in recent years. this year, vikram Akula, chairman of sks Microfinance, privately sold shares worth about $13 million. he defended the industry s record before the India economic summit meeting, saying that a few rogue operators may have given improper loans, but that the industry was too important to fail. Microfinance has made a tremendous contribution to inclusive growth, he said. destroying microfinance, he said, would result in VIETNAM MICROFINANCE 13

13 B U L L E T I N N O. 1 6 nothing less than financial apartheid. Indian microfinance companies have some of the world s lowest interest rates for small loans. Mr. Akula said that his company had reduced its interest rate by six percentage points, to 24 percent, in the past several years as volume had brought down expenses. unlike other officials in his industry, vijay Mahajan, the chairman of basix, an organization that provides loans and other services to the poor, acknowledged that many lenders grew too fast and lent too aggressively. Investments by private equity firms and the prospect of a stock market listing drove firms to increase lending as fast as they could, he said. In their quest to grow, he said, they kept piling on more loans in the same geographies. he added, that led to more indebtedness, and in some cases it led to suicides. still, he said, the number of borrowers who are struggling to pay off their debts is much smaller than officials have asserted. he estimates that 20 percent have borrowed more than they can afford and that just 1 percent are in serious trouble. one of India s leading social workers, ela bhatt, who heads the self-employed Women s Association, or sewa, said microfinance firms had lost sight of the fact that the poor needed more than loans to be successful entrepreneurs. they need business and financial advice as well, she said. they were more concerned about growth not growth of the livelihoods and economic status of the clients, but only the institutions growth, she said. Mr. Mahajan, who is also the chairman of the Microfinance Institutions network, said that the industry was now planning to create a fund to help restructure the loans of the 20 percent of borrowers in Andhra pradesh who were struggling. he also said the industry, which has been reluctant to accept outside help, would share its client databases with the government and was negotiating restrictions on retail lending that did not go through the nonprofit self-help lending groups. the collapse of the industry could have severe consequences for borrowers, who may be forced to resort to money lenders once again. It is tough to find a household in this village in an impoverished district of Andhra pradesh that is not deeply in debt to a for-profit microfinance company. k. shivamma, a 38-year-old farmer, said she took her first loan hoping to reverse several years of crop failure brought on by drought. When you take the loan they say, don t worry, it is easy to pay back, Ms. shivamma said. the man from share, the company that made her first loan, did not ask about her income, Ms. shivamma said. she soon ran into trouble paying back the $400 loan, and took out another loan, and then another. now she owes nearly $2,000 and has no idea how she will repay it. the television, the mobile phone and the two buffaloes she bought with one loan were sold long ago. I know it is a vicious circle, she said. but there is no choice but to go on. lydia polgreen reported from Madoor, and vikas bajaj from Mumbai, India. hari kumar contributed reporting from Madoor. (Source: New York Times) 14 VIETNAM MICROFINANCE

14 VIETNAM MICROFINANCE WORKING GROUP BUSINESS DEVELOPMENT SERVICE... Continued from page 9 Why is bds important and how does it help clients? Micro-entrepreneurs often lack market access, technical and managerial skills and the information necessary to transform a microloan into a competitive microenterprise. for micro-entrepreneurs to rise above poverty and for their businesses to survive, they must overcome challenges of competition, market fluctuations, operational risks, productivity and resource limitations. they must also have an ability to identify new market opportunities to strengthen and extend its business operations. Microfinance does not necessarily assist an entrepreneur in moving their business from the start-up phase to the next level but bds can. bds is focused on building the capacity of small and medium microenterprises (MsMes) so micro-entrepreneurs can transform their micro-enterprises into blooming MseMs. the provision of bds assistance can build the confidence within the client to better manage the challenges of managing a new business. bds can assist in overcoming the issue of market access because clients do not have access and do not know how to gain access to new markets and those that do are constrained by insufficient capital, limitations in production capacity, lack of market recognition. bds can help clients fully utilize their loans and how they can operate their livelihood/trading business competitively to expand their operations. It can also teach clients how to improve the quality of their products or to develop new products. In a micro-level, bds can result in the personal growth of the entrepreneur and help increase the income, productivity and employment of the micro, small or medium-enterprise. on a macrolevel, appropriate bds can lead to successful MsMes and will have a considerable impact on the economy in terms of employment generation, income enhancement and poverty alleviation. overall, these successes can spread a positive message to all members in the community and encourage knowledge sharing between successful entrepreneurs and new start up enterprises. How can MFIs benefit from BDS? MfIs have the primary role of providing financial services, particularly capital, to support the business endeavors of the poor households and microenterprises. however, MfIs can facilitate the access of their clients not only to financial services but also bds. As the MfI s financial services mature it will be better placed to extend its operations to include bds to help clients enhance their businesses. Many microfinance professionals argue most microfinance clients use their borrowings to smoothen consumption within the household and therefore do not need bds. however, there are clear benefits for MfIs and their clients in providing in bds. they include: 1. there is a relationship between the performance of the MfI and the microenterprises: enhancing the performance of clients will also enhance the MfI s fund performance 2. MfIs will benefit from better loan repayment and portfolio quality, client retention and the increased ability of the entrepreneur to access other financial products and services 3. bds can be instrumental in scaling up enterprises and realizing bigger loans 4. develop each other s market When is BDS appropriate? In the early 1990s, the provision of bds was not successful because it was supply-driven, of poor quality and often confined to management training. recent experience has shown that bds should be demand-driven as clients must demand bds rather than be forced to upon them. provision of bds should be financially sustainable, costefficient and affordable to clients. bds should be diversified beyond management training. Provision of BDS by MFIs there are different ways in which MfIs can provide bds to its clients. MfIs can provide bds directly, facilitate bds through a strategic alliances with other bds providers or establishment of specialized, subsidiary or spin-off firm. the choice of modality will depend on the demand and supply of bds, capacity of the MfI to provide bds or the nature of bds service. by providing bds to complement microfinance for microenterprises, MfIs can have a greater opportunity to provide a financial and non-financial products and services that will holistically service their clients. Microfinance will allow for the initial start-up but bds will assist in the personal growth of the micro-entrepreneur as well as the expansion of their micro-enterprises VIETNAM MICROFINANCE 15

15 B U L L E T I N N O. 1 6 MICROFINANCE AND HIV-INFECTED PEOPLE Nguyen Thi Minh Huong - Vice-director of Women Economic Development Support Department Vietnam Women s Union (1). Report on protection and fight against HIV/AIDS, September (2) Social Affairs Committee of National Assembly & UNDP, August 2009 As of september 2010, a reported 180,312 people live with hiv/aids in vietnam, of which 42,339 are AIds patients. At the present, over 74% of communes and wards as well as 97,8% of districts in vietnam have reported cases of people infected by hiv/aids 1. over the past years, many national and international organizations have made efforts through practical activities to promote prevention strategies and fight against the spread of hiv/aids in the community. however, the support to hiv carriers and their families to access microfinance services has not yet attracted due attention. research and practices in many countries show that poverty and hiv/aids are strongly interrelated. In vietnam, many young people (male and female) from poor households migrate from rural areas to cities or other localities to seek economic opportunities and employment. however, due to their lack of knowledge and life skills, they are at high risk of exposure themselves to high risk behaviors which may led to hiv infection. In addition, the poor have limited access to education and awareness of hiv/aids and lack knowledge on protection measures against hiv infection. once infected with hiv, due to low nutrition, the poor are more susceptible to hivrelated secondary infection and the infection is more likely to accelerate to AIds. conversely, hiv/aids is one of the reasons households fall into poverty. families with hiv infected members must bear high medical costs but the infected family member may lose their employment due to AIds, thereby reduced the earning capacity of the household and decrease household disposable income. on a macro leavel, hiv/aids negatively affects the national economy due to a reduced labor force, the loss of income reduces the taxable population, leading to a decrease in resources for education and health services and places increased pressure on state finances. hence, overall decline in economic growth. the research socio-economic impacts of hiv/aids to vulnerable families and poverty situation in vietnam revealed that in all lowincome groups, families with hiv infected people have lower income than those without (total income/year of those without hiv carriers is 1.3 times higher than the households with hiv carriers). the total lost income of caregivers and the sick in the hiv families is 1.6 times higher than the one without hiv infection, regardless of direct medical expenses of hiv carriers families are higher. Medical costs are a huge burden on the poor households of hiv carrier families and treatment have reduced effectiveness due to the poor nutrition. families tend to divert household income normally budgeted for education, housing and health care, to medical treatment. this means children of these families are at increased risk of early drop-out from school. these families also have greater difficulty in investing in their homes and obtaining stable 16 VIETNAM MICROFINANCE

16 VIETNAM MICROFINANCE WORKING GROUP accommodation. research predicts there would be between an increase from 49,000 to 90,000 people living with hiv in vietnam who will become newly poor or fall deeper into poverty due to hiv/aids. We may all aware that the scope of effect of hiv/aids to household economy depends on a so-called household financial safety net (an actual economic situation and ability to generate assets in future). If households do not have capacity for production and economic development, the financial safety net can not assist the families in protection against hiv/aids for long term. from this perspective, microfinance is seen as one of the measures to break the vicious circle of poverty and hiv/aids. Access to loans and other microfinance services is a right and a need of people living with hiv and their families. experiences of people living with hiv have indicated challenges in obtaining much needed microfinance, particularly for poor households. Infected people may live with the infection for up to 10 years or longer and are able to work. In order to gain stable and sufficient income to pay for their living and medical expenses, they need access to credit for household economic development and to smoothen spending patterns. It should be noted that microfinance institutions in vietnam service women in particular, and women living with hiv are more economically active than men with hiv (83% vs. 68%). therefore, microfinance institutions with the objective to reduce poverty should not include the group of people living with hiv, women hiv carriers and their families. In practice, there are many barriers in providing people living with hiv and their families to access to credit. firstly, hiv carriers and their families are perceived as high risk credit clients because of their reduced capacity to repay the loans. for example, their health results in the inability for either themselves or their family members to work or engage in stable employment or due to discrimination, hiv carriers may lose their jobs or lose their customers (at their trading business). In addition, the high demand for medical care, hiv carriers may use loans to pay their medical care instead of investing to income generating activities. from a microfinance institution s perspective, lending to people with hiv/aids can negatively affect their fund s performance as there is a higher risk of increased delinquency and defaults due to clients sickness and the inability for members in their poor households to service the loan. operational costs are also likely to increase due to delinquency management, follow up conducted by credit officers for non-payment or absence at monthly meetings, additional effort to strengthen portfolio management and default monitoring. In solidarity lending, there is a higher risk that group members will have to share the burden of the outstanding loan when the hiv carrier and their family members are unable to service the loan. In the long term this situation may affect the group solidarity and possibly lead to groups rejecting hiv carriers for being part of the group lending. furthermore, hiv carriers and their families need to draw on their savings more frequently to cover their expenses. this would also negatively affect a MfI s fund performance. In the areas seriously affected by the hiv/aids epidemic (such as African countries, thailand and some states in India), microfinance institutions get affected negatively because of their staff infected with hiv, resulting to poorer institutional performance. It is evident that people living with hiv and their families are more likely to become poor or poorer; and the provision of financial services can assist them but there are key challenges that must be overcome. how can microfinance institutions provide access microcredit to people living with hiv and their families whilst remaining profitable? experience of microfinance institutions operating in hiv infected areas revealed some valuable insight on mitigating the impact of hiv/aids through the following ideas: linkage of its programs and projects supporting hiv carriers (programs of health care, insurance, communication, education); not only target a single group of hiv carriers, but to diversify the loan portfolios to mitigate risks of defaults and to ensure operational sustainability; provide loans to family members of the hiv carrier client who agree to repay loans on the infected person s behalf; develop financial products appropriate to the clients: flexible savings; short term loan, one lumpsum payment, emergency loans; micro-insurance, insurance to hiv carrier death (to cover funeral costs, cash return, loan written-off); promote group solidarity not only in term of loan repayments but also in mutual assistance to reduce discrimination (job seeking, products sales, communication to eradicate discrimination against hiv carriers); and offer non-financial services such as training, vocational training, counseling, health care, legal counseling to protect client s assets, community-based hiv carrier children care models to support people living with hiv, especially women so that they can focus on their production business. recently in vietnam, some organizations both national and international have become increasingly interested in the Continued on page VIETNAM MICROFINANCE 17

17 B U L L E T I N N O. 1 6 can deposit or withdraw their savings according to their demand. since vbsp s launch of the new savings product, there has been great demand. the product has clear advantages in effectively assisting poor households in accumulating savings. the key advantages of vsbp s new product includes the following: EFFECTIVE SAVINGS SERVICE Phan Ha - International Cooperation Dept., Vietnam Bank for Social Policies Savings for the poor was implemented by vbsp nationally after the successful piloting of a new savings product for poor and lowincome households funded by the ford foundation in hoa binh, gia lai and hai phong provinces. the savings service is now regulated under decision no.244/nhcsxhkh dated february 18th, 2009 by vbsp s general director. vbsp s savings product has been developed to meet the demands of the poor and low- income households and is based on the trends in their voluntary savings. As committed oneself to the convention of the savings and credit groups, the group members security: vbsp s solvency is guaranteed by the government and has a strong reputation for being reliable and prestigious. the poor believe that they can entrust their money with the credit and saving groups because they feel their assets with be secure. In addition, savings deposits can be used as a capital resource for lending to the members of the credit and saving groups with the bank s regulation; easily access and low transaction costs: As members pool their savings and the collection is performed by their group leaders within their local area, transaction costs remain low and members can easily deposit or withdraw from their savings; flexibility: Members can deposit or withdraw from their savings whenever they require. While group leaders make group deposits on a fixed date every month, members can withdraw their savings or use their savings to make loan repayments in interval, there s still available cash for transaction. favourable savings levels: the minimum level of savings vnd 1,000. the low minimum is serviceable by poor and lowincome households. vbsp s new savings service was implemented in february out of the 189,047 savings and credit groups operating nationally, 142,739 groups were eligible for mobilizing savings deposit. 99,194 of those are now implementing 18 VIETNAM MICROFINANCE

18 VIETNAM MICROFINANCE WORKING GROUP vbsp s savings service. the total balance of savings deposit with vbsp reached vnd 344,539,458,610 at the end of september 2010 and approximately three million poor households are saving in groups. vbsp s savings product has helped the poor become increasingly aware of their savings practices and has improved the bank s capacity of managing transactions with customers and the savings and credit groups leaders. effective product for bank s to assist its customers in accumulating wealth through savings. the savings service is not only making contribution to the government s poverty reduction program but has also lead to vbsp strengthening the capacity of its staffs, group leaders and improved the poor s awareness of savings and financial services. Apart from continuously improving the quality of vbsp s savings service, the bank has promoted its service through posters, leaflets, video clips for its staff and created a training manual to assist group leaders in managing the operations of savings group in accordance to best practice and relevant regulation. vbsp s savings product has provided an innovative and DATA ON THE SAVINGS OF POOR HOUSEHOLDS (UPDATED TO 30/9/2010) no. branches total number of savings and credit groups total number of groups eligible to be assigned to mobilize savings total number of savings and credit groups already taken savings Amount of savings collection from the beginning of the year Amount of savings withdrawn from the beginning of the year balance of savings deposit I northern uplands 47,214 37,093 21,568 72,292,248,777 10,125,548,708 71,594,609,922 II red river delta 31,687 29,479 27,379 65,535,969,626 2,015,391,228 63,857,177,559 III north central 31,489 22,559 14,347 69,314,882,423 39,494,160,128 46,504,143,863 Iv central coast 18,002 13,745 9,824 45,429,630,276 6,086,665,308 44,463,189,324 v central highlands 14,505 11,323 7,106 7,316,836, ,188,465 18,087,263,937 vi south east 13,527 8,467 5,699 55,620,209,780 5,265,879,290 50,967,298,507 vii Mekong river delta 32,623 20,073 13,271 42,959,189,669 6,612,321,198 49,065,775,498 total 189, ,739 99, ,468,966, ,259,154, ,539,458, VIETNAM MICROFINANCE 19

19 B U L L E T I N N O. 1 6 LOAN PRODUCTS TO THE DEMAND OF THE POOR Do Thi Chanh Capital Aid Fund for Women in Economic Development in HCMC management skills to the credit and savings meetings with the view to equip knowledge and experience to the members, helping them use efficiently their loans for production business. With the efforts made by all the cwed staff, the fund has achieved impressive results. the number of loans released constantly increased overtime, higher than previous years by 5-8%. from there were 58,528 loans disbursed with a total amount valued at 162,133 billion vnđ, of which 6,794 billion vnđ for cultivation; 69,652 billion vnđ for husbandry; 76,447 billion vnđ for services; 6,049 billion vnđ for sanitary toilets; 3,189 billion vnđ for handicrafts. I SOME ACHIEVEMENTS FROM PROVIDING LOAN PRODUCTS: 1. Loan products of CWED: Members of cwed are mainly poor women, applying loans for cultivation, husbandry, livestock, petty trading business, handicraft, etc to generate income and develop household economy. besides, there are some members who are staff of women s union, women-entrepreneurs accessing loans for acquiring working facilities, and equipment for production business. loan terms are from 3 to 12 months. Interest rates vary from 0% to 1.5 %, flexible to specific target groups. repayment collection of principal, interest and savings is flexible either weekly or monthly, allowing the poor to ensure repayments. the clients attend regular meetings among their credit and savings groups consisting of 5 to 7 members. Meanwhile, the Women s union integrates social activities such as awareness raising, production experience sharing, business skills, budgeting skills, family As of 31/12/2009, loan outstanding was 31,745 billion vnđ and 8,278 households as active members. 2. Loan products from the Urban Upgrading Project the Women s union of ho chi Minh city is one of 4 partners selected by the World bank to implement its revolving fund in the framework of the urban upgrading project in the city, launching credit activities in 65 wards in the districts of 3, 4, 6, 7, 8, 11. following the positive results achieved by cewd, the Women s union of the city entrusted cewd to implement this project since July the target clients are low-income households, applying for loans to repair their houses and households economic development. the interest rate is preferential at 0.6%/month for house repair and at 0.7%/month for household business. the repayment of principal, interest and savings is on monthly basis. Many loans have been released. since , the total value loaned out was 88,049 billion vnd, of which: house repair: 58,728 billion vn Đ 20 VIETNAM MICROFINANCE

20 VIETNAM MICROFINANCE WORKING GROUP CAPITAL AID FUND FOR WOMEN IN ECONOMIC DEVELOPMENT (CWED) UNDER THE WOMEN S UNION OF HO CHI MINH CITY WAS ESTABLISHED FOLLOWING THE DECISION NO. 230/QĐ-UBND DATED 17/10/2003 OF THE CITY PEOPLE S COMMITTEE, WITH A LEGAL CAPITAL OF 20 BILLION VND ACCUMULATED FROM PROJECTS AND PROGRAMS ADMINISTERED BY THE WOMEN S UNION OF THE CITY. THE OBJECTIVES OF THE FUND IS TO SUPPORT WOMEN TO DEVELOP PRODUCTION BUSINESS, TO CREATE JOBS AND TO INCREASE INCOME, CONTRIBUTING TO POVERTY REDUCTION AND HUNGER ELIMINATION OF THE CITY AND TO THE IMPLEMENTATION OF THE ACTION PLAN OF THE WOMEN S UNION OF THE CITY TO CREATE FAVORABLE CONDITIONS TO WOMEN IN ECONOMIC DEVELOPMENT TO BECOME WEALTHY PROPERLY WITH THE VIEW TO AFFIRM THE ROLE OF WOMEN IN FAMILY AND SOCIETY. household economic development : billion vnđ As of 31/12/2009, as many as 4,445 active households with a total loan outstanding of 22,480 billion vnđ. 3. Loan products of Rural Sanitation and Environment Program under the implementation of decision no.07/2007/ nqhđnd dated 5/7/2007 of people s council of ho chi Minh city related to the investment policy on rural and agricultural infrastructure facilitating restructure of agriculture economy of the city, the Women s union of the city was entrusted by the city people s committee to implement the rural sanitation and environment program for the period between with a total capital of 20 billion vnđ funded by the city s budget to offer loans to construct sanitary toilets properly and build biogas cellars in suburb districts and in the area adjacent to ho chi Minh city. since october, 2008 cewd was delegated by the Women s union of the city to implement this program. the loan size for sanitary toilets is 3,800,000 vnđ, for a term of 2 years. the loan size for building biogas cellars is 9,000,000 vnđ, term of 3 years, interest rate of 0%. After approving the construction quality, the households with loans for sanitary toilets would get an additional support of vnđ and the households with loans for biogas cellars would get another 1,000,000 vnđ. As of August, 2010, the fund was entrusted to continue providing credit for sanitation purposes with another 20 billion vnd to respond to the unmet demands of the inhabitants. over 2 years (since october 2008 to october 2010) under the framework of the rural sanitation and environment program, cewd has disbursed 40, 864 billion vnđ to 8,630 households, of which for sanitary toilet construction: 26,894 billion vnđ; for biogas cellar building: 13,968 billion vnđ II - CONCLUSIONS: the achievements reached by capital Aid fund for Women in economic development of ho chi Minh city remain minimal, though proving the fund has made remarkable contributions in providing assistance to the poor. this is illustrated by the increased number of disbursed loans and of clients, and the financial products are responsive to the needs of the poor and low-income people. under the directions toward coming years, cewd expects to spin-off a sustainable microfinance institution with the view to serve more poor people, assisting them to escape from poverty and stabilize their well-beings. the fund will focus on building the institutional capacity, refining its organizational structure, and enhancing management capacity and technical skills for the fund staff, while invest further in technology and information management system and software, enabling the fund achieve the goals defined by the cewd and the Women s union of ho chi Minh city VIETNAM MICROFINANCE 21

21 B U L L E T I N N O. 1 6 MICRO-INSURANCE: SHARING WITH NINH PHUOC WOMEN DEVELOPMENT SUPPORT FUND Nguyen Minh Quang - Ninh Phuoc Women Development Support Fund The ninh phuoc development Women Assistance fund (dwaf ninh phuoc) started its operations in July 2001, covering 10 communes in 2 districts of thuan bac and ninh phuoc, ninh thuan province. In May, 2007, the fund transformed to a social fund, following the decree no.177/1999/nd-cp of the government dated 22/12/1999. the objectives of the fund is to establish a sustainable system offering credit, savings and microinsurance services to poor women, helping them and their families to create jobs, increase income and manage risks in their life, through which gradually empowering women in their family and in society. today the fund serves 4,700 women, and 70% of them are poor. loans and savings are two popular financial services offered by the fund. In 2005, the fund piloted a credit-life product to its client as part of the project expanding microfinance programs and microinsurance services to women workers in informal sector. At the initial phase of micro-insurance product pilot, the fund aimed to serve only loan clients. however, after review of results of the pilot, it was obvious that the micro-insurance product reduced the vulnerability of all clients. lack of coverage for death or total permanent disability of the the husband is the only shortfall of the product. to respond to this issue, the fund collaborated with ninh thuan social insurance to develop a product offering a credit-life insurance covering both husband and wife for its clients, at a premium of 0,9%/loan/year. since the launch of the insurance service, the poor clients of the fund are covered under favorable conditions to help maximize the benefits of their loans whilst ensuring sufficient protection of both the institutional portfolios and the borrower s families. under the agent-partnership model with bao viet insurance company, the fund has attracted staff of bao viet insurance company to build capacity for supplying insurance services to the low-income market and share in the fund s social mission to assist the poor. In short, microfinance exposes poor and low-income clients to risks if they are unable to repay their loans due to sever injury or death of income earners in the household. to reduce their vulnerability, insurance services can be effective in protecting their income and against default and also manage the risk of delinquency for microfinance institutions. these real life stories illustrates how microfinance institutions can help the poor effectively managing their risks. 22 VIETNAM MICROFINANCE

22 VIETNAM MICROFINANCE WORKING GROUP Box 1: Risks can happen to anyone Mrs Nguyen Thi Xi was an excellent member and a centre chief in An Hai commune. She has been with the Fund for 3 years. Sheis committed to the activities of the Fund and popular in the community. Mrs Xí was healthy and was the main source of income in her family; supporting her elderly mother and a child. After borrowing a new loan, she was in an unfortunate accident and she died at age 40. At the time of her loan, the Fund had not yet launched a micro-insurance product, so Mrs Xi s family inherited the debt, a outstanding amount that her elderly mother has not been able to repay. The unexpected event to Mrs Xi sparked a realization in the community that these risks can happen to anyone and at any time, therefore to buy insurance is one way for the borrower to protect their family against such risks. Some of the members used to think they were healthy and young, and did not want to buy insurance but hearing the story of Mrs Xi, they were convinced of the benefits of micro-insurance and joined the program. Mother, husband and two children of Mrs. Ut in front of her altar Box 2: Case study of Mrs Nguyen Thi Ngoc Ut A member s sister with total permanent disability gets coverage from Bao Viet Mrs. Nguyen Thi Ngoc Ut lived in An Thach village, An Hai commune with her husband, two children and her mother. She joined the DWAF Fund for 2 years. In April 2005, she got a loan of 2,000,000 VND and contributed a premium of 18,000 VND for her credit-life insurance. In October, she contracted a serious sickness, and had to be hospitalized. She was later diagnosed a lung cancer. She died a week after at the age of 35. The Fund helped her family to complete an insurance claim. Bảo Việt insurance company paid an amount of 2,000,000 VND within 3 days. After repaying all outstanding debts, her family received an additional pay-out of 1,200,000 VND in cash (including all savings balance). Upon receiving the amount, her husband was deeply moved. Once borrowing, we have to repay the debt. Thanks to the DAWF, we had sufficient funds to cover the debt but also enough cash to prepare for my wife s funeral, he said VIETNAM MICROFINANCE 23

23 B U L L E T I N N O. 1 6 CITIBANK HEAD UPBEAT ABOUT VIETNAM S MICROFINANCE OPPORTUNITIES Interview with Tuoi Tre Question: Citi recently approved a $70 thousand grant to support the Citi Microenterpreneurship Award in What are the reasons for this social investment? Is it because microfinance is Citi s priority in Vietnam? Mirofinance has been the priority of citi s philanthropic activities for 25 years, in which we partner with international and local networks of microfinance practitioners to build capacity on the ground. More than 6 years ago, we started to discuss internally the fact that microfinance is becoming a real industry. We recognized then that we needed a business approach, so we established a business unit within citi. since then, citi has been working in the microfinance sector with dual approach: a vibrant philanthropy program and a business arm to leverage what we are best at as a bank, which is investing in major microfinance institutions. In vietnam, this is the fourth year in a row that we organize the citi Microentrepreneurship Award program. the main reason for this continued effort is obviously that the MICROFINANCE AND HIV-INFECTED PEOPLE Continued from page 17 provision of credit to people living with hiv. however, such credit provision have been constructed as stand-alone projects with limited scope and lending rather than being an independent component that is administered professionally and sustainable. effective support for The challenges for these organizations would be to sharpen management skills, reduce costs and diversify products and programs to meet the need of their clients Mr. Brett Krause Managing Director, Citi Country Officer program has been an outstanding success. In the last 3 years, the Award program highlighted the achievements of 221 excellent entrepreneurs and credit officers in the fight against poverty and set up typical examples to encourage the community and society to follow. Question: What are the opportunities and challenges for the microfinance industry in Vietnam? the government of vietnam has long been invested in social and poverty reduction programs in which microfinance (which was previously referred to as micro credit programs) plays an important part. the recent regulations such as the decrees number 28 and 165 issued in 2005 has laid the firm ground to encourage and develop strong microfinance institutions and performance in vietnam. We have seen strong growth in microfinance area in vietnam. According to a recent research by the state bank, during the growth of total mobilized capital in both the formal people living with hiv must be provided by formal lending institutions to ensure adequate support, effective fund management and tailored products that fit the needs of infected people and their families. there are many challenges for people with hiv in obtaining microfinance or other complementary products and services to enable them to have a fulfilling life in an inclusive environment. and semi-formal microfinance sectors in vietnam has been 35 percent year on year. clearly, such an impressive expansion attracts donors and investors, and at the same time demand close attention and supervision by various government agencies to ensure that resources are utilized efficiently and the target remain those who are out of reach by the commercial banking sector. so, I would see microfinance as an evolving sector in vietnam in the medium term, with various partners thriving in their own role. I would see the microfinance institutions undergoing transformation to play multiple roles because they need additional capital for their lending program. At the same time, there will be institutions or programs devoted not just to achieving scale, and even full sustainability, because they re working with very difficult and vulnerable communities. the challenges for these organizations would be to sharpen management skills, reduce costs and diversify products and programs to meet the need of their clients. Microfinance development is a long, continuous process and being engaged by many organizations. In order for microfinance to attain healthy sustainable growth, the government and donors should play an essential role in creating an enabling legal environment, facilitating the transformation of microfinance institutions, and encouraging the local commercial banks to participate more deeply in this sector. 24 VIETNAM MICROFINANCE

24 TABLE OF SEVERAL ACTIVITIES OF MICROFINANCE INSTITUTIONS IN VIETNAM Institutional Characteristics Outreach Indicators Productivity no. Name of Organizations total Assets (vnd) branch staff loan officer gross loan portfolio (vnd) savings (vnd) Active borrower Average loan balance per borrower (vnd) Active borrowers/ staff Active borrowers/ loan officer loan portfolio/loan officer(vnd) 1 tym fund 219,944,150, ,029,421,400 44,430,838,000 40,201 4,478, ,285,924,439 2 capital Aid fund for employment of the poor - hcm 552,063,000, ,511,000, ,054,000, ,141 3,895, ,652,340,102 3 fund for poor Women - thanh hoa 21,951,277, ,354,358,921 3,483,010,000 8,171 2,368, ,245,851 4 M7 uong bi 13,562,305, ,661,252,000 6,672,513,000 3,083 4,431, ,535,810 5 M7 ninh phuoc 7,440,000, ,042,562,500 3,700,833,177 4,579 1,538, ,256,250 6 fund for Women development - hcm 32,239,000, ,744,000,000 3,514,000,000 9,812 3,235, ,116,266,667 7 fund for poor Women ha tinh 52,518,605, ,510,000,000 5,991,109,000 24,431 2,026, ,880,795 8 M7- dien bien district 3,474,000, ,861,580,000 1,279,593,000 1,992 1,938, ,158,000 9 credit-saving program, phu Yen, son la 4,092,000, ,758,000,000 2,492,000,000 2,685 1,399, ,789, credit-saving program, dai tu, thai nguyen 5,173,000, ,200,000,000 1,005,989, ,538, ,000, childfund 5,393,727, ,117,360,000 1,276,367,000 5, , ,113, An phu saving and credit program - My duc, hn 3,893,165, ,200,000, ,758, ,602, ,000, c&d 1,000,000, ,000,000, ,839, ,485, ,000,000, gret vinh phuc 1,333,100, ,200,000, ,000, ,538, ,000, ppc ha tinh 13,778,600, ,575,500,000 8,482,400,000 4,012 3,383, ,068, revolving sanitation fund, hai duong 9,110,745, ,881,610,000 1,133,864,000 5,304 4,125, , ,881,610, capital Aid fund for poor employees and civil servants of br-vt 24,509,847, ,955,618,000 6,733,667,000 8,000 2,494, , ,850,802, binh dinh Women's union 3,532,440, ,532,440, ,200, ,773, ,532,440,000 Note: All datas is collected until 31/12/ VIETNAM MICROFINANCE 25

25 B U L L E T I N N O. 1 6 Nationwide THE SECOND NATIONAL MICROFINANCE CONFERENCE REGULATIONS FOR VIETNAM MICROFINANCE INSTITUTIONS AND SUSTAINABLE DEVELOPMENT hanoi on the morning of december 14th, 2010, the second national conference organised by the state bank of vietnam in collaboration with the vietnam Microfinance Working group will be held at the vietnam Women and development centre. the regulations for vietnam Microfinance Institutions and sustainable development conference will cover topics based on the development needs of microfinance institutions and the current trends of the industry. the conference aims to establish a scientific forum to collate solutions and development tendencies of microfinance in vietnam in coming years. THE CEREMONY OF MICROENTREPRENEURS CITI VIETNAM 2010 In the mid december 2010, the Microentrepreneurs citi vietnam 2010 will be presented at the vietnam Women and development centre. the Award is in its 4th consecutive year in vietnam and has attracted the participation of almost 50 organisations, over 284 microentrepreneurs and credit staff nationwide. the ceremony will honor 50 outstanding microentrepreneurs, 15 credit staff and 5 microfinance institutions in recognition of their excellent achievements in the fight against poverty. they represent the inspiring leaders in the industry and are role models to the community.. Microentrepreneurs Award is an annual activity that is jointly organised by citi foundation (citibank) and the vietnam Microfinance Working group. the Award serves three key pursposes: (1) to honor the poor who use efficiently micro loans from microfinance institutions to develop their production business, and the most outstanding credit staff and microfinance institutions; (2) to increase awareness on the role and successes of microfinance; (3) to strengthen the relations between microfinance institutions. over the years, the Award has celebrated microfinance and its effectiveness in alleviating poverty; contributed to increasing awareness on microfinance programs and activities in vietnam; and encouraged greater cooperation between microfinance institutions. INCEPTION WORKSHOP TO MICROFINANCE SUPPORT PROGRAMME IN VIETNAM phu tho Inception Workshop to Microfinance support programme in vietnam was launched on september 16th, 2010 by the Ministry of labour Invalids and social Affairs (MolIsA) and the office of International labour organisation in vietnam (Ilo). the project support Microfinance programme in vietnam was approved by the decision no. 1116/QĐ-lĐtbXh dated 16/9/2010 with a non-refundable grant of 375,840 usd, of which cordaid (nethelands) funds 349,596 usd and Ilo funds 26,244 usd. the project will be implemented in some provinces and municipals over 24 months ( ). the EVENTS IN FOCUS On 25th and 26th of November, 2010, in Ninh Thuan province, the microfinance network of M7/CFRC/M7 Ninh Phuoc, Dariu Foundation, NMA, CEP, Social Funds of Ho Chi Minh City and Da Nang City, and some INGOs jointly organised a workshop entitled: "Sharing experience in transformation and development orientations of microfinance in Vietnam in its new context". the objective of the workshop was to review the process of transformation, and license application following the decrees 28/ /nĐ-cp. based on this, to draw lessons in process of transformation, file preparation and application, as well as orientations to microfinance institutions in the new context. On 25/11/2010, the Project Management Unit of Hai Phong Microfinance Fund under Hai Phong Women Union successfully organised a review workshop for phase II capital for environment improvement and review phase I capital for housing rehabilitation. the review workshop has assessed the fund performance over 5 years of operations and presented the achieved results, constraints and limitations and the action plans of the fund for the coming time. The TYM Fund organised 4 training courses Client Care and Communication Skills for 122 technical offers and new staff working in 44 branches of the fund. the objective of the training to equip officers with basic communication skills,and teach them the importance of customer service and professionalism. the feedback regarding the content and methodology of the training course was very positive. 26 VIETNAM MICROFINANCE

26 VIETNAM MICROFINANCE WORKING GROUP will be overseen by its project owner, the social protection bureau. the objective of the project is to strengthen operational and management capacity of microfinance institutions towards more professional work practices, promote responsiveness to the market s needs, encourage diversification of savings products to increase the benefits to low-income households; to enhance the design of micro-insurance products appropriate to low-income households. the outcomes of the project include new relationships with training centres that have experienced master trainers in microfinance; innovative ideas for distribution channels of savings products and insurance services to increase outreach to rural and mountainous areas; focus on financial education lowincome people and how they can maximize the the use of the financial services provided to them. THREE MICROFINANCE INSTITUTIONS RECEIVED FUNDING FROM SUPPLEMENTARY MATCHING FUND hanoi As of november 17th, 2010, the state bank of vietnam (sbv) signed a funding Agreement with three microfinance institutions recipients in the framework of project named technical Assistance formalizing Microfinance Institutions funded by Asian development bank (Adb). the three MfIs awarded funding were: Affection fund (tym) of the vietnam Women s union, capital Aid fund for employment of the poor (cep) of the labour federation of ho chi Minh city and hoa Women support fund. tym and cep signed their agreements with the sbv in May 2010 and received the first tranche of funding (110,000 usd and 147,498 usd respectively) at the beginning of novermber the thanh hoa Women support fund signed the agreement for funding support of 145,450 usd. formalizing Microfinance Institutions is a technical Assistance project provided by the Adb and is valued at 1.65 million usd. this includes a non-refundable grant of 1.5 million usd from Japanese fund for poverty reduction (Jfpr) and a counter value fund of 150,000 usd from the vietnamese government. the project has already been signed and is now in the implementation phase. one of the main objectives of the project is through the supplementary Matching fund of the Jfpr to support the transformation of five pilot microfinance institutions to become formalised to operate under the decree no.28 and decreee no.165. EVENTS IN FOCUS On 13/10/2010, the Women s Union of Da Nang City organised a Ceremony of Establishment Announcement to the Women Development Support Fund to celebrate the 80th anniversary of the establishment of the vietnam Women s union (20th october). the fund is aimed at becoming a sustainable and efficient microfinance programme offering financial and non-financial services and endeavours to strengthen the institutional capacity of the da nang Women s union by providing microcredit which will encourage women enpowerement for the development of women in all sectors. the fund will also offers loans to income generating activities and to improve the standard of living for poor households. overall, the fund seeks to alleviate poverty in line with the city s poverty reduction targets.n on 25/8/2010, at hanoi, in the tại framework of technical Assistance prject preparation for loans to development of Microfinance, the state bank of vietnam (sbv) in cooperation with the Asian development bank (Adb) organised a seminar on microfinance performance assessment and key issues of the development strategy for microfinance industry in vietnam. On 25/8/2010, as part of the tại framework of Technical Assistance prject Preparation for Loans to Development of Microfinance in Hanoi, the State Bank of Vietnam (SBV) (in cooperation with ADB), organised a seminar on microfinance performance assessment and key issues of the development strategy for microfinance industry in vietnam. After 5 years of operations and continued focus to support economic development activities with more emphasis on the grass root level, the Women s Union of Mai Sơn district (Sơn La) has supported 1,900 member families to escape from poverty as at the Women s union of the district have enhanced the communication of relatedf parties by actively cooperating with related agencies, working with local businesses to increase networking, mutual assistance and knowledge/labour sharing. to raise income for their families, the Women s union have mobilise the members to apply for new technology in agriculture, tools to increase productivity and improve product quality VIETNAM MICROFINANCE 27

27 B U L L E T I N N O. 1 6 World News 1. ECONOMIST INTELLIGENCE UNIT GLOBAL MICROSCOPE ON MICROFINANCE RANKINGS 2010 peru offers the best microfinance business environment for the third year running, according to the economist Intelligence unit's global microscope on the microfinance business environment Yet the top spots have been shuffled this year, with the philippines advancing to second place, overtaking the 2009 runner-up, bolivia. new to the top ten, kenya managed to climb three ranks and squeezed into tenth place overall; pakistan jumped from 11th to fifth place thanks to regulatory reforms and an increased range of microfinance services. In turn, two countries - uganda and nicaragua - fell out of the top ten to take 11th and 13th spots, respectively. According to the study, vietnam which has a score of 22.7 on a scale of 0 to 100, is ranked 52th out of 54 attending countries (in 2009, the rank is 54th out of 55 countries). the study said, the microfinance sector in vietnam is dominated by the vietnam bank for social policy (vbsp), which disburses heavily subsided loans. there are other government programmes and institutions, which, along with vbsp, comprise around 90% of microcredit in the country. the range of services offered by MfIs is limited. Although loans are widely available, other services, such as riskmanagement products, are neglected. stateowned banks focus more on providing cheap credit than mobilizing savings, while the semiformal MfIs are not allowed to take voluntary deposits. the study provides a basis for benchmarking the business conditions for privately provided microfinance in countries around the world. the study was commissioned and funded by the Multilateral Investment fund, caf or the Andean development corp., and netherlands technical Assistance trust fund at the International finance corp. the 2010 index covers the period from August 2009 through May 2010, and evaluates microfinance across three distinct categories: regulatory framework, institutional development and investment climate. Rate National Point (Total 100) (Total 54) 1 Peru Philippines Bolivia Ghana Pakistan Ecuador El Salvador India Colombia Kenya Uganda Kyrgyz Republic Nicaragua Chile Paraguay Cambodia Panama Honduras Guatemala Dominican Republic Georgia Armenia Mexico Tanzania Tajikistan Brazil Yemen Nigeria Costa Rica Rwanda Madagascar Bosnia Bangladesh Mozambique Nepal Cameroon Argentina Azerbaijan China Haiti Indonesia Sri Lanka Senegal Mongolia Morocco Uruguay Dem. Rep. of Congo Turkey Lebanon Thailand Jamaica Vietnam Trinidad and Tobago Venezuela VIETNAM MICROFINANCE

28 VIETNAM MICROFINANCE WORKING GROUP 2. SKS MICROFINANCE IPO SEEKS AS MUCH AS $347 MILLION IndIA - on July 26, sks Microfinance ltd., India s largest microfinance company, raised its initial public offering to as much as 16.3 billion rupees ($347 million) after six quarters of gains by the key equity index. sks has lured investors including soros and billionaire n.r. narayana Murthy on expectation credit to the nation s poorest may surge by more than 40 percent in a market where about 120 million households don t have access to banking and financial services. sks provides loans from $22 to $260 each for women raising cows or opening a village tea stall in a nation where 828 million people live on less than $2 a day. India has an untapped credit demand of 1.2 trillion rupees, according to crisil ratings, the Indian unit of standard & poor s. sks, which received a non-banking finance company license from the reserve bank of India in 2006 and currently has 5.3 million customers, is India s largest microfinance company by value of loans outstanding, the number of borrowers and number of branches, according to crisil. the offering cements citigroup s no. 1 ranking among banks managing share sales in India for a second consecutive year, after it advised companies including state-run nmdc ltd. and ntpc ltd. on raising funds, according to bloomberg data. kotak Mahindra is ranked second, followed by ubs Ag. A 21.6 percent stake in sks will be offered to investors, with 7.45 million new shares to be sold by the company and 9.35 million shares by existing investors, according to a July 16 sale document. At least 5.03 million shares will be made available to retail bidders. the offer period ends on Aug. 2, with institutional investors allowed to bid until July 30. UPCOMING CONFERENCE 1. Investment and Innovation in Microfinance Asia 2011 Jan , 2011 Singapore themes: MicroFinancial Services World Singapore 2011 will take into account the macro environment to focus on new product innovation, emerging technology systems, changing regulatory systems and original delivery channels. 2. 4th Global Microfinance Investment Congress 25-26, 2011 New York, NY themes: - high liquidity in Microfinance Investment vehicles (MIvs) and endogenous problems in MfIs over indebtedness of clients, deterioration of lending discipline and increased regulatory risk - Ability to make local currency loans - excess liquidity in the market - Interest rate pricing inflexibility - ever growing competition between banks and MfIs - new risk caused by commercialization - business ethics in the industry 3. Global Microcredit Summit 2011 Nov , 2011 Valladolid, Spain the Microcredit summit campaign is a project of the results educational fund, a u.s.-based grassroots advocacy organization committed to ending hunger and poverty. these are the four core themes of the Microcredit summit campaign: - reaching the poorest; - reaching and empowering women; - building financially self-sufficient institutions; and - ensuring a positive, measurable impact on the lives of clients and their families. (Source: Bloomberg) VIETNAM MICROFINANCE 29

29 B U L L E T I N N O. 1 6 LIST OF ORGANIZATIONS ACTIVATING ON MICROFINANCE IN VIETNAM NORTH No. Name of MFIs Telephone Address 1 tym hanoi thuy khue, tay ho, hanoi 2 binh Minh cdc hanoi floor 8, no.8, Alley 31, thanh Xuan dist., hanoi 3 Microfinance and development center (M&d) hanoi room 315, f4 building area, Yen hoa, trung Yen, cau giay dist., hanoi 4 community finance resource centre hanoi no. 29, Alley 6, dang van ngu st., hanoi 5 the center of small enterprise development Assistance hanoi floor 8, no.8, Alley 31, thanh Xuan dist., hanoi 6 vietnam-belgium credit project hanoi hang chuoi, hanoi 7 hanoi fei hanoi ly thai to, hanoi 8 save the children hanoi / World vision hanoi Action Aid hanoi gret hanoi e3, ngoai giao doan trung tu, 6 dang van ngu, dong da dist., hanoi room 401, haec building - A, ham long, hanoi room 401, haec building - A, ham long, hanoi room , A1, ngoai giao doan van phuc, 298 kim Ma, hanoi 12 care hanoi Xuan dieu, tay ho, hanoi 13 caritas swizerland hanoi doi can, hanoi 14 childfund hanoi floor 10, building 59 Quang trung, hanoi 15 cpi (counterpart International) hanoi no. 12, Alley 6, doi nhan st., ba dinh, hanoi 16 did (développement international desjardins) hanoi room 309, 12 trang thi, hanoi 17 cesvi hanoi no. 18, 31/46 Xuan dieu, tay ho, hanoi 18 rdsc (rural development service center) hanoi no. 2, d Area, 45/39 hao nam, hanoi 19 Microfinance and community development Institute hanoi no. 15, 324/22 thuy khue, tay ho, hanoi 20 International labor organization hanoi / nguyen thai hoc, hanoi Women's development promotion fund, uong bi, Quang ninh province Women support fund, dong trieu district, Quang ninh province Quang ninh Quang ninh Women union, Quang ninh province Quang ninh ridp - rural Income diversification project, tuyen Quang province Women union, dinh hoa district, thai nguyen province Women union, dai tu district, thai nguyen province tuyen Quang thai nguyen thai nguyen Women union, pho Yen district, thai nguyen province thai nguyen M7 - dien bien phu city dien bien floor 5, song sinh supermarket, uong bi borough, Quang ninh province dong trieu district Women union, Quang ninh province Women union, ha long city, Quang ninh province department of microfinance & small business, vn bank for social poplicy, tuyen Quang province Women union, dinh hoa district, thai nguyen province Women union, dai tu district, thai nguyen province Women union, pho Yen district, thai nguyen province no. 838, 7/5 road, dien bien phu city, dien bien province 30 VIETNAM MICROFINANCE

30 VIETNAM MICROFINANCE WORKING GROUP NORTH No. Name of MFIs Province/City Telephone Address 29 M7 - dien bien district dien bien CENTRAL Women union, dien bien district, dien bien province 30 M7 - Mai son son la Women union, Mai son district, son la province 31 Women union, phu Yen district, son la province son la Women union, phu Yen district, son la province 32 revolving sanitation fund, hai duong hai duong Women union, hai duong province: do ngoc du st., hai duong city 33 revolving sanitation fund, thai binh thai binh no. 126, tran hung dao, thai binh 34 revolving sanitation fund, nam dinh nam dinh Women union, nam dinh province, 70 tran phu, nam dinh city, nam dinh province 35 Microfinance fund, hai phong hai phong b tran Quang khai, hai phong 36 thanh hoa fund for poor Women (fpw) thanh hoa no. 9, hang nan, thanh hoa city, thanh hoa province No. Name of MFIs Province/City Telephone Address 37 pro - poor center can loc district ha tinh nghen town, can loc district, ha tinh province 38 ha tinh Women union ha tinh phan dinh phung, ha tinh city, ha tinh province 39 plan International hue b phan chu trinh, hue 40 Quang ngai rural development program (rudep) Quang ngai pham van dong, Quang ngai city, Quang ngai province 41 Women union, Quang ninh district, Quang binh province Quang binh 42 phuoc thien consultancy khanh hoa 43 dak lak Women union dak lak 44 ninh phuoc Women development support fund ninh thuan Women union, Quang ninh district, Quang binh province phan dinh phung, nha trang city, khanh hoa province truong chinh, buon Me thuot city, dak lak province Quarter 5, phuoc dan town, ninh phuoc district, ninh thuan province SOUTH No. Name of MFIs Province/City Telephone Address 45 capital Aid fund for employment of the poor hcm (cep hcm) hcm cach Mang thang 8, district 1, hcmc capital Aid fund for Women in economic 46 development (cwed) (ho chi Minh Women union) hcm tran Quoc thao, Ward 7, district 3, hcmc 47 dariu foundation hcm le van huan, tan binh district, hcmc 48 norwegian Mission Alliance (or Microfinance project for poor women in tien giang province) hcm 49 cep - long An long An 50 cafpe ba ria - vung tau ba ria - vung tau b3 tran nhat duat, tan dinh Ward, district 1, hcmc no. 2, nguyen trung truc, Ward 1, tan An borough, long An province tran hung dao, Ward 1, vung tau city 51 ben tre Women union ben tre 11 ngo Quyen, Ward 3, ben tre 52 "ban tay vang" program (can tho Women union) can tho 53 tien giang Women union tien giang /3 hung vuong, can tho city no.2 le loi, Ward 1, My tho city, tien giang province VIETNAM MICROFINANCE 31

31 VIETNAM MICROFINANCE WORKING GROUP (MFWG) BACKGROUND OVERALL GOAL vietnam Microfinance Working group (MfWg) was founded to create a forum for microfinance practitioners to share experiences with each other, come together to debate relevant issues, and speak to policy makers with a unified voice. founded in 2004 as an informal organization under the vufo-ngo resource center, according to the Working group guidelines approved by the resource centre steering committee in April 2003, the MfWg is open to all individuals and organizations interested in microfinance in vietnam. to enhance the impact of microfinance on poverty alleviation by promoting quality and sustainability of microfinance in vietnam both in the practice of institutions and in an improved enabling environment. KEY OBJECTIVES I. to encourage policy dialogue across relevant stakeholder organizations in order to facilitate the development of a favorable enabling environment and; MEMBERS II. to promote sustainable microfinance among practitioners by disseminating information, sharing lessons learned and achieving consensus on best practices for microfinance in vietnam. the network includes more than 300 participants coming from approximately 100 organizations including ngos, Ingos, international organizations, organizations and institutions activating on microfinance sector, donors, individuals and government agencies. up to 60 organizations regularly attend meetings. At present, the MfWg communicates with participants mainly via an list server. SERVICES - capacity building: trainings, workshops, conferences - fund raising - Advocacy - Information dissemination: bi-annual bulletin, mailing list - data collection DONORS & PARTNERS Advisory Services