In 1995, the Vietnam Bank for the Poor established by the Prime Minister upon Decision, operated for non-profit purposes and poverty reduction
After seven years of the Vietnam Bank for the Poor operation, the international financial institutions commented that: VBP is Government’s preferential lending program, it is not the activities of a credit institution, no basis for sustainable development because it has not received funding from international financial institutions.
In 2002, aimed at separating preferential credit from commercial credit as well as restructuring the banking system, Vietnam Bank for Social Policies was established and operated by the Prime Minister upon Decision.
Funding mobilized by Government of Vietnam was used for lending to the poor households, beneficiaries policy in need of loan for production and business with preferential interest rates, for poverty reduction, living improvement, social stability, enhance organization chart.
On March 11th 2003, VBSP has officially started its operations.
VBSP has officially started its operations since March 11th, 2003, based upon the re-organization of the Vietnam Bank for the Poor and separation from Vietnam Bank for Agriculture & Rural Development (VBARD) for the purpose of separating the preferential credit from the commercial credit in commercial banks.
VBSP set up a nation-wide unified management and administration apparatus. VBSP is a legal entity with its financial autonomy and operation sustainability. VBSP has its own seal, legal assets and nationwide transaction network from central to local level. Its Headquarters is based in Hanoi. The initial charter capital is VND 5,000 billion. As of 31st December 2016, the charter capital is approximately VND 10,700 billion.
VBSP’s operation characteristics: VBSP acts as a non-profit credit institution with a compulsory reserve ratio of 0% and its solvency is guaranteed by the Government. It is exempted from deposit insurance, taxes.
VBSP’s functions: VBSP is a State-owned credit institution that is currently in charge of providing policy credit to the poor and other policy beneficiaries.
Task: VBSP implements such basic operations of a bank as: capital mobilization (from international and domestic individuals and organizations; receiving capitals from the government and People’s Committee, etc.); extending loans to the poor and other policy beneficiaries and payment services.
Target clients: VBSP lending to the poor households, the near-poor households and other policy beneficiaries.
Organization structure: VBSP system includes:
- Head Office located in Hanoi;
- Transaction Centre subordinated to the Head Office, Training center, provincial and municipal branches;
- District- level transaction offices (with their own seals and managed by Director)
Administration and management: VBSP’s administration is the Board of Directors (BOD), the BOD has a number of Representative Units at provincial and district levels (headed by Chairpersons or Vice-chairpersons of equivalent-level People’s Committees). Managing VBSP is a General Director and his/her subordinates.
Financial regime: Its fiscal year begins on January, 1st and ends on December, 31st of the calendar year. VBSP is a concentrated accounting unit in the whole system with financial autonomy; self-responsible for its own operation legally; implementing capital maintenance and development; covering costs and credit risk.
Risk management: VBSP shall provision credit risk as part of operational costs to cover all the risks arising from the individual and local cases beyond control according to regulations of the Government (at present, provision rate is equal to 0.02% of the average annual loan outstanding). In case the provisioning is not sufficient to cover risks of the year, VBSP submit to the Governmental for additional compensation.
A nation-wide network from Head Office to communes has been constituted:
- A Head Office;
- A Transaction center;
- One IT center;
- One Training center;
- Seven Training Facilities;
- 63 provincial and municipal branches;
- 629 district transaction offices;
- 10,932 mobile transaction points at communes/wards;
- 190,000 Savings & Credit Groups at communes/wards nationwide.
- 6,7 million active borrowers(households)
Administration: Includes BOD at central level and BOD Representative Units at provincial, municipal and district level with total of 8,000 members (Headed by Chairperson or Vice- chairperson of People Committee at the same level), of which:
- The Board of Directors (at central level);
- 63 BOD Representative Units at provincial/ municipal level;
- 650 BOD Representative Units at district level
Management: The number of VBSP staff is over 9,000 as of December 31th 2016.
Banking funding sources
VBSP’s funding sources consist of: (i) Funding from the Central State Budget; (ii) Borrowings designated by the Government ; (iii) Fund mobilized and borrowed with market interest rate; (iv) Entrusted capitals from the local state budget, economic organizations and individuals; and (v) Other funds and capitals
As of 31th December 2016, the total VBSP’s funding source reached VND 162,380 billion (over USD 7.1 billion), in which, the ratio of funding comprises: Mobilization and borrowings with market rate (49.4%); borrowings from commercial banks mandated by the Government (27.1%); and funding from the Central State Budget (17.1%).
VBSP provide loans to customers as follows:
- Poor households
- Near poor households
- Newly escaped from poverty households
- Disadvantaged students
- Job creation Household members of Social policy household going abroad as migrant workers for limited terms.
- Non-poor households living and doing business in specially disadvantaged areas and communes
- Housing loans for poor households in flooding area in Mekong river delta
- Poor and non-poor households living in rural areas in need of fund for building Safe water supply and rural sanitation works
- Ethnic minorities living in specially disadvantaged communes
- Business and production units, enterprises with drug-detoxified employees program.
- Housing loans for the poor households.
- Extremely disadvantaged ethnic minority households program
- Credit for traders doing business in disadvantaged
- Small and medium enterprises
- Planting households.
Lending methods: There are two main lending methods:
- Direct disbursement and collection of principal to/from the borrowers
- Coordination with mass organizations (Women Union, Farmer Association, Veteran Association and Youth Union) in some steps of lending;
In addition, some foreign projects have been piloting the method that VBSP acts as a wholesaler of lending groups.
Interest rate: the interest rate is applicable since 2016: from 0% /year to 9.6% / year, depending on specific beneficiaries of each lending program.
- Over 30 million underprivileged households access inclusive finance
- Nearly 132,000 Gia Lai households escape poverty
- CEO of Vietnam Bank for Social Policies meeting with JFC-Micro Delegation from Japan
- Escaping from poverty with small loan
- Case study: Experiences in managing microfinance from VBSP is extremely valuable
- The poor in ethnic minority and mountainous areas entitled to apply for maximal loan size of VND 50 million
- Growth must be associated with financial inclusion quality
- Improve financial inclusion for Mekong Delta region
- VBSP aims to provide 1.8 billion USD to southwestern region in 2030
- VBSP participate in the round-table discussion with the Dutch Queen on Financial Inclusion
LENDING INTEREST RATE
DEPOSIT INTEREST RATE