Delivering loans to poor households and other disadvantaged groups for poverty reduction

VBSP's Deputy General Director Nguyễn Văn Lý (the right) is meeting with the correspondent from The Government Web Portal.

Vietnam Bank for Social Policies (VBSP) has been implementing preferential credit programs, measures of demand stimulation, prevention from economic downturn, keeping social security as stated by the Government.

The Government Web Portal has had an interview with VBSP's Deputy General Director Nguyễn Văn Lý on VBSP's activities with a view to introduce Government's policies to the poor and other social policy beneficiaries.  

Correspondent: The Government has issued the decision on assisting interest rate for credit of the poor and other social beneficiaries in VBSP. Could you tell me which beneficiaries to be supported this interest rate?  

Mr. Nguyễn Văn Lý: They are the targets of all current credit programs in VBSP (lending to the poor, job creation, disadvantaged students, business and production in disadvantaged areas etc.). Specifically, the loans with interest rate of more than 4%/year will be redeemed 4%/year, under 4%/year will be down to 0%. For instance, the lending interest rate is from 10.8%/year to 6.8%/year in business and production in disadvantaged areas; from 6%/year to 2%/year in lending to disadvantaged students; from 3%/year to 0% in housing loans following the Government's Decision No. 167/2008/QĐ-TTg. Particularly, for lending to disadvantaged students, interest payments are not compulsory during the grace period and will be paid after 4-5 years with the state policy of interest rate assistance.  

Correspondent: What activities has VBSP had to perform the Government policy?

Mr. Nguyễn Văn Lý: VBSP is currently conducting over 15 the credit programs designated by the Government. In this year, VBSP has renovated in all aspects related to those programs, especially making loan disbursement to social policy beneficiaries. In quarter I/2009, VBSP has disbursed VND 7,500 billion, increasing outstanding loans by VND 5,500 billion, leading to total outstanding loans up VND 58,000 billion with nearly 7 million households and customers, reaching 40% of the Government's fund plan to disburse for the credit programs. For instance, for lending to disadvantaged students, the loans of VND 3,500 billion are disbursed to meet borrowing demands in second semester of the academic years 2008 - 2009, increasing total outstanding loans at VND 13,500 billion.  

All credit programs demonstrate more social and political meanings than economic aspect, contributing to keeping social security, for example, in the credit for poor households, borrowers get loans for production and housing repairs. For epidemic disease areas, the bank rises more loans. Particularly  after the Government issued Decree No.30a/2008/NQ-CP on support of rapid and sustainable poverty reduction in 61 poor districts, VBSP has increased more VND 600 billion to help poor districts enough loans for business and production and escape from poverty.  

Correspondent: One idea shows that loan disbursement still gets slow, so what do you think about the current loan disbursement speed?  

Mr. Nguyễn Văn Lý: The disbursement programs depend on many factors. If which one is "domestic-oriented", loan disbursement is very fast, for instance, lending to the poor, disadvantaged students, safe water supply & rural sanitation etc. in quarter I/2009, reaching more 40%. The overseas relating programs such as lending to migrant workers abroad for limited term, slow loan disbursement is due to unstable labor export markets.  

Correspondent: In fact, loans for purchasing seedlings and production means has gained effective results in some poor districts. Nevertheless, each household is entitled to borrow VND 5 million. Do you think it is too little? What is your opinion on this?

Mr. Nguyễn Văn Lý: VND 5 million is a non-interest loans to support the poor. Moreover, they also participate in other credit programs such as lending to the poor with loans of VND 30 million, interest rate of 7.8%/year and are then redeemed at 3.8%/year; lending to disadvantaged students, safe water supply and rural sanitation etc.  

Correspondent: What is the role of local authority in the process of supportive policies?  

Mr. Nguyễn Văn Lý: To deliver government's loans to the poor and other social beneficiaries, VBSP, as designated by the State, is a loan provider. Massorganizations such as Farmer Association, Youth Union, War Veteran Union and Women Union, take over communicating and instructing groups to certify eligible borrowers and then approved by communal People's Committee and Board of Poverty Reduction. Finally VBSP, based on those results, makes loan disbursement and together with BOD's Representative Unit and other relevant agencies supervise loan usage. The relationship among levels creates democracy, explicitness and ensure the credit characteristics of fund revolving.

Correspondent: Thus is it necessary to have measures to cross check and recover negativity as delivering loans to wrong address?  

Mr. Nguyễn Văn Lý: Monitoring plays such an important role in total credit programs of VBSP. We are always aware that delivering preferential credit to wrong addresses will be bring about collapse. When monitoring and supervising, depending on each kind of credit program and it is necessary to socialize through grass-root authorities and mass organizations etc.

For example: The lending program of disadvantaged students is monitored and summed up in each commune. We have supervised over 10 thousand communes and wards in total 11 thousand all over the country.  Also, the propaganda program is continued to launch, helping residents more understanding and improving the self-responsibility capacity of local authorities and mass organizations. From monitoring and summing up, we have found out tens of communal chairmen, hundreds of mass organization members and detected thousands of households using loans for wrong purpose. We have seriously handled and the lending rate to wrong addresses only makes up 0.07%.

PV: What will VBSP do and which new programs to perform the common target of overcoming difficulty and preventing from economic downturn?

Mr. Nguyễn Văn Lý: In addition to implementing the lending programs of poor households, disadvantaged students, safe water supply and rural sanitation and job creation etc., VBSP is conducting housing loans to the poor following the Government's Decision No. 167/2008/QĐ-TTg.

Localities have completed eligible procedures up to now. The target by 2012 is that, we endeavor to complete in two years. Besides, we are concentrating on loan and human capacity for 61 poor districts to conduct Government's programs effectively, developing poor districts in the most rapid roadmap.  

VBSP affirms to be an active tool of the Government to conduct social policies. We are trying to consolidate the mechanism to keep both existing programs and any other running smooth. Implementing following the motto "Delivering loans to right address, most quickly with the highest socialization and lowest cost” (cost for borrowers and bank to save the state budget).

Thank you very much!