Development strategy of VBSP for the 2011-2020 period: 10 years and big steps foward

Looking back at the implementation of VBSP development strategy for the period 2011 - 2020, VBSP’s member of the Board of Directors - General Director of VBSP Duong Quyet Thang said that during the implementation of the Development Strategy, at some point the country faced many difficulties, challenges, especially Covid -19 pandemic in 2020 and increasingly complicated and unpredictable natural disasters and epidemics which made the risk of poverty and falling back into poverty always emerge, thus, social policy credit also needed changes in both resources and modes of support.

That is the reason why the Strategy is effectively deployed with the special attention of the Party Central Secretariat through Directive No. 40-CT / TW dated November 22nd, 2014 of the Secretariat on strengthening Party's leadership towards social policy credit (Directive No. 40-CT/TW) which  connected the socio-political system into a unified body of both direction and force to participate in poverty reduction, deepening effectiveness of a particular policy consistent with the political structure of Vietnam.

100% of the poor and other last-mile populations can have access to the products and services provided by VBSP. The policy credit source focuses on lending to communes in ethnic minority areas, extremely difficult areas, remoted and border areas.

100% of the poor and other policy beneficiaries who need and qualify have access to the products and services provided by VBSP. The policy credit source focuses on lending priority to communes in ethnic minority areas, extremely difficult areas, remote and border areas.

Bridge converging ideas to reduce poverty sustainably

In just 10 years, the Government has twice raised the standard of poor and near-poor households, along with the increase in the number of poor and near-poor households which has brought great pressure on VBSP on credit provision. Recognizing and predicting these developments clearly, the Board of Directors of VBSP has always been aware that mobilizing and concentrating financial resources is one of the decisive factors for success or failure in policy credit deployment.

The biggest advantage in this period was that the Party, National Assembly and the Government have paid great attention to poverty reduction, drastically directed to gather large resources to implement policy credit programs through VBSP. The proof was the year 2017 - the first year that VBSP was allocated capital in the country’s mid-term investment plan for the 2016-2020 period, creating a premise for VBSP to grow stable and sustainable capital as well as improve financial capacity. Looking back on the whole period of 2011 - 2020, the State budget has allocated VND 41,204.5 billion, in which additionally provided VND 8,270.5 billion of charter capital and VND 12,412 billion to implement credit programs for policy credit etc.

Directive No. 40-CT/TW of the Secretariat and Decision No. 401/QD-TTg of the Prime Minister on the plan of implementing Directive No. 40-CT / TW has made local entrusted funds become a prominent point in concentrating resources for effective implementation of social policy credit in the locality since the implementation of the Development Strategy. Up to now, local budget funds entrusted to VBSP reached VND 20,200 billion  with an increase of VND 17,914 billion - 8.8 times compared to 2010. In addition, the system of State Credit Institutions continued to maintain 2% of the balance of deposits at VBSP, increasing this capital by 6.4 times compared to the time before implementation of the Strategy, from VND 12,821 billion in 2010 to VND 81,462 billion.

Also during this period, in addition to the Government-guaranteed bond issuance, maintaining savings deposits from the poor through the Savings and Credit Groups, VBSP focused on mobilizing funding from the market, especially the launch of the product to mobilize residential deposits at commune transaction points.

VBSP currently has fixed transactions at 10,426 transaction points in communes, wards and towns nationwide

As a result of complying with the motto "The State, businesses and people work together", "Central and local work together" has increased the size of the total operating capital of VBSP 2.6 times, from VND 90,400 billion in 2010 to VND 233,661 billion after 10 years of implementing the Development Strategy, the growth rate of the total capital from policy credit activities averaged 10% / year.

The story of resource concentrationwas not only in terms of capital, but more importantly, management and channelof policy credit in recent years. Capital channel and managementwasno longer solely on the shoulders of entrustedmass organizations, since it had dedication of the local government. In which, the addition of the Chairman of the Communal People's Committee to the Representative Board of the Board of Directors (BOD) of VBSP at district level has created positivechange in all aspects of operation, improving the efficiency of policy credit, improve the role of State management, especially the communal government with social policy credit activities.

The method of entrusting loans through mass organizations has continued to be deployed more effectively since 2014 with the signing of new agreementcooperation between VBSP and these organizations, which has closely linked the 4 parties: “The Bank; Government; Mass organizations; Savings and Credit groups” to help the poor and other policy beneficiaries. As of November 30^th, 2020, entrusted mass organizationswere cooperating with VBSP to manage VND 224,344 billion, accounting for 99.5% / total social policy loan outstanding.

The model of "VBSP's transaction point at the commune/ward People's Committee" enhances access to social policy credit services for the poor and other disadvantaged groups, reducing transaction costs and time of borrowers, ensuring democratic and public social policy credit activities with the mode of "transactions at home, disbursement at commune"

In particular, regular consolidation and improvement of Savings and Credit groups which have been considered as the "extended arm" of the VBSP in implementation of policy credit has contributing to channeling policy credit to beneficiaries in a timely manner, reducing costs and time for borrowers and improving access to social policy credit services for the poor and other policy beneficiaries. Along with nearly 173,000 Savings and Credit groups, 10,426 Commune Transaction Points which operating periodically, covering almost all villages, communes, wards and towns nationwide, especially in remote and disadvantaged areas, have helped VBSP effectively implementing the motto "Understand deeply, serve dedicatedly", "Transactions at home, disbursement at the commune".

These achievements once again demonstrate the effectiveness of the Government's specific social policy credit management, which has been consistent with the political structure of Vietnam.

Accelerate poverty reduction and integration

Also from "Understand deeply, serve dedicatedly", implementation of the Strategy of VBSP was not only hard plans, it was actively and flexibly built according to the progress of the economy, requirement on poverty reduction and practicaldemand of the poor and other policy beneficiaries. The fast integration speed of the economy together with requirement of multidimensional poverty reduction, sustainability, and climate change response has been considered by VBSP leaders to make a series of policy proposals to the State Bank and Ministries and authorities to advise the Government on completing a chain of credit programs that connect and support the poor on every step towards sustainable poverty reduction.

As a result, from 2011 up to now, the State has issued many new credit policies so that no one would be left behind in the economic development process. From policies supporting the system of general poverty reduction programs such as: Loans to poor households, near-poor households, newly escaped from poverty households, job creation to specific policies for each vulnerable group, especially extremely disadvantaged ethnic minorities, poor ethnic minorities in the Mekong River Delta, programs for loans to cope with climate change, for sustainable poverty reduction to people affected by marine environmental incidents etc. Along with that, VBSP also advised relevant ministries and agencies to re-systemize credit programs to avoid spread, duplication, and increase loan amount according to actual needs. At the same time, VBSP has always proactively amended and supplemented new credit policy mechanisms, facilitated timely access to capital for eligible poor and policy beneficiaries who have demand for loans.

Along with scale expansion, VBSP constantly focuses on consolidating and improving the quality of social policy credit. From proactively improving debt quality in system operations and in each link in implementation and supervision chain to the establishment of a Steering Committee for strengthening and improving credit quality in the Southwest region and in branches with weak performance,  proactively report to the Steering Committee of the Southwest, Central Highlands and Northwest on implementation of policy credit, proposing to increase the attention of all authority levels over deployment of preferential policy credit in the area. From 2018 until now, VBSP has sent qualified staff from the Head Office and branches to strengthen the quality of branches with weak performance, contributing to keep the overdue debt ratio of the whole system to always much lower than the target set out in the Development Strategy, i.e. below 3%/ total outstanding loans. Up to now, overdue and frozen debts of VBSP only accounted for under 1% of the total outstanding loans, lower than the target set by the Development Strategy.

Average annual growth of outstanding loans reaches the Development Strategy target; The policy credit funding focuses on lending priority to communes in ethnic minority areas, extremely disadvantaged, remote and border areas. In the period 2011 - 2020, the growth rate of outstanding loans of policy credit programs was about 10%/year on average. Total outstanding loans of policy credit programs increased by 2.5 times, from VND 89,462 billion in 2010 to VND 226,264 billion as of December 31^st, 2020, with nearly 6.5 million active poor, near poor households and policy beneficiary borrowers, of which loans for ethnic minorities and mountainous households were VND 56,344 billion (accounting for 25% of total outstanding loans), policy credit has accessed 100% of communes in ethnic minority and mountainous areas.

The results of all these changes have been painted into the picture of policy credit with warm colors. Social policy credit continues to be invested in 100% of communes, wards and towns nationwide with over 21.5 million turns of poor households and other policy beneficiary borrowers, total lending was over VND 504,565 billion. Social policy credit contributes to reducing the rate of poor households in the 2011-2015 period from 14.2% to 4.25%; the rate of multi-dimensional poor households from 9.88% (2016) to 3.75% (in 2019), it was expected to decrease to be below 3% (2020).

The effect from the policy credit capital in the coming time will be even stronger with the support from the State as well as the entire socio-political system. However, new challenges are also emerged as a new poverty line will be issued in the midst of deeper integration with increasing unpredictable risks. In that context, the urgent need is to develop a new strategy for VBSP for the period 2021 - 2030. In which, the requirement to improve financial capacity is a prerequisite factor for VBSP to better complete tasks assigned by the Party and State. This not only requires the efforts of the Government and VBSP, but also requires cooperation of the whole political system for sustainable poverty reduction, development of policies combined with proper resource allocationto increase efficiency of each policy. With VBSP, the story of strengthening capital management is also an issue to consider in order to improve the effectiveness of policy credit in the future.

vbsp.org.vn