Savings and credit group model: Best practice from VBSP

(VBSP News) To boost extending loans to the pro-poor and other marginalized ones who are almost living in remote, mountainous and rural areas where limit knowledge, infrastructure and services, VBSP has launched the model of savings and credit groups (SCGs) with some following features.

SCGs gathers poor households and other marginalized ones who voluntarily join in and have borrowing demand for improving livelihood, creating jobs and rising incomes; help and share experience with each other in production, business and life. They observe each other in borrowing, using loans for right purpose and repaying debts to the bank on due; practice savings behaviors to create their own asset and get used to marketed commodity production, credit and finance.

SCG model in VBSP

SCGs are gathered on the basis of voluntariness, solidarity, mutual assistance, mutual benefit, commitment to fulfill obligations when borrowing and paying loans and other obligations. The group operates on the principle of unification and vote by group member majority under the direction of the SCGs management. 

SCGs are established on the basis of group members who legally reside in the same village, hamlet, squirrel, residential group, neighborhood, cluster and similar area.  In case a village does not have enough required minimum number of group members, it shall be established according to the area of ​​the adjacent village in the commune. The establishment of the SCGs and the group's operation convention must be approved by the Commune People's Committee.

SCGs members join the training session on finance banking lesson at the group meeting

To meet the requirements of policy credit management with an increasingly large scale and higher quality, the VBSP Board of Directors has issued Decision No. 783/2003 and sub-Decision No. 15/2015 on the regulation on organization and operation of the SCGs with the basic the following contents:

SCGs have at least 05 members and maximum 60 members. When customers deposit money into VBSP, they will be opened accounts to deposit, withdraw and perform other payment services according to VBSP's regulations. The Group Management Board includes 01 Team Leader and 01 Vice Group Leader with specific responsibilities and tasks.

The SCGs operate independently from SPUs.  VBSP signs contracts with SCGs on not being allowed to collect principal debt, they can only collect interest if they are qualified and has credibility. The group leaders are paid the maximum commission by 0.1% calculated on the actual interest.  The SCGs are instructed by the VBSP to open books, monitor loan use, result of debt and interest repayment of each member in the group. 

SCGs are holding monthly group meetings at village culture centers

VBSP assigns a number of tasks for SPUs under signed entrusted contracts.  One of the key tasks of the SPUs in the mandate is to guide the establishment, management, and monitoring of the activities of the SCGs, disseminate credit policies to the customers together with the bank; supervise the selection of beneficiaries of loans at the group; organize training for group members, leaders and Management Board.  In addition, SPUs also coordinate with functional agencies to integrate agricultural, forestry, fishery and industrial promotion programs, guide business methods, and help borrowers to use loans effectively.

VBSP implements loan management, direct debt collection to borrowers in the communes, wards and towns.  Every month, VBSP makes transactions at the commune transaction point in front of the witness of SCGs and SPUs.  VBSP organizes the accounting and monitoring of each borrower, publicizes credit policies, publishes the list of borrowers, ensures the supervision of communal authorities and social communities. 

At the commune transaction points, VBSP held meetings with SPUs and SCGs to promptly handle problems in the process of using loans, minimizing possible negative effects;  organize training for SPUs and SCGs on implementation of regulations and mandated work. 

vbsp.org.vn