Policy lending to ethnic minority households - Difficulties and challenges

Vietnam Bank for Social Policies (VBSP) reported total outstanding loans of nearly VND 31,648 billion for ethnic minority households, accounting for 22.5% of total outstanding loans, with almost 1.45 million active borrowers. Average loan size of VND 22 million per household, the overdue rate of 0.3%.

However, the implementation of policy credit programs for ethnic households faces some difficulties and challenges, more or less impact the effectiveness and efficiency and humanity of these programs.

 The policy credit programs for ethnic minority households

Regarding the capical resources to implement the program, the limited resource to implement credit programs for ethnic minority households is the most challenging. Due to limited capital resources from the State Budget, VBSP has not received sufficient and timely funds to implement some credit programs for ethnic households in 2014 and 2015. 

Regarding the loan term,  under the Decisions by the Prime Minister, under the credit programs for ethnic minority households, the maximum loan term is 05 years (60 months) and the grace period does not exceed 05 years. However, in reality many borrowers still cannot repay debt after the grace period and classified as overdue debt, which puts negative impacts on the life of poor ethnic minority households and effectiveness and feasibility of the programs. 

Regarding the loan size, under the proposals from the National Assembly delegates and electors nationwide and the evaluation missions, the prevailing loan size is small and unadequate to current production requirements for capital . As a result, the expected effectiveness of the policy credit is not met completely.

Ethnic minority households

Almost ethnic minority households live in mountainous areas with disadvantaged natural conditions.The hard weather is badly affected by such natural disasters as: storm, flood, terrible and long-lasting coldness, which damage production and assets, and make the ethnic minority households falling again into poverty. Furthermore, the ethnic minority households live far away from the center; with bad transportation and underdeveloped conditions; poor infrastructure for production and livings; limited areas for agriculture cultivation.  

The education level of ethnic minority households is still low. Over the past years, many ethnic people of ethnic households, who borrow money from VBSP for migrant working, do not meet the high requirements of some labor importing markets, particularly markets with high offered income. In addition, as having low awareness to strictly follow working regulations, some workers have poor industrial work style, some quit job before the contract termination date or violate the contract etc. Furthermore, the capacity, costume and method of production of certain ethnic minority households are still ineffective and under the self-supply manner.

Collaboration with partners

As the connection between technical support, technology transfer of State partners, enterprises and mass organizations with credit support of VBSP is still weak, the effectiveness of policy credit for sustainable poverty alleviation is still restricted. 

In some areas, the capacity in management, lending collaboration and training of mass organization staff is still limited.