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Updated: 2016-03-09 16:55:33

Sustainable poverty reduction using preferential credit solutions

There is a "gap" in the implementation of preferential credit policy of the State to reduce poverty, i.e poor households are not subject to funding, while their gap with poor households is just 1,000 VND / person / month. So what is the solution to fill the "gap”?



Đinh Ngc, Ba Na ethnic person in Pa Pet village, Bo Ngoong commune, Chu Se district, Gia Lai province gets the 10-million VND loan from vBSP to plant coffee and pepper, now release poverty with hundreds of dongs/year

Achievements and practical concerns

After nearly 10 years of establishment, the VBSP has achieved tremendous results, received high appreciation from the government, the people, especially people in remote, disadvantaged and mountainous areas, and people from ethnic minority groups. As of 31/5/2012, total loan outstanding of VBSP credit programs reaches VND 107,262 billion, increases by 15 times compared to the time VBSP took over the programs, annual average growth rate is 34%, with nearly 6,9 million active customers, increases by more than 4 million customers.

Average loan outstanding of VND 2.5 million/ household (in 2003) has increased to VND 8.9 million (as of 5/2012), with more than 11.4 million turns of poor households getting loans. VBSP has managed to build a reasonable model of credit organization and management, which can mobilize combined strength of local government, mass organisations, can ensure democracy, and can provide transactions at commune to make it more convenient for the people etc.The impact of credit quality is also growing (2.5 million households got out of poverty; new jobs were created for the nearly 2.5 million workers; 2.8 million students received student loans, 3.3 million water and sanitation works were built, etc.) contributing to political stability and social security at local level.

Achievement is great, but besides many areas show concerns on credit assistance to households who just get out of poverty to help them escape poverty sustainably. Ms. Huynh Thi Ngoc Hanh, Deputy Chairman of the Women Union in Long An province comments that many households who have recently escaped poverty, cannot access to policy credit, but not yet can access commercial bank loans either. Therefore, it is necessary to continue lending to them with higher interest rate but still maintain some preferential treatment. Sharing the same viewpoint, Ms. Truong Thi Phu, Vice Chairman of People’s Committee in Go Dau district (Tay Ninh) said: Every year the district chooses one commune to boost poverty reduction and success of this movement is largely thanks to preferential loans from VBSP. So the district also proposes expanding eligible borrowers to near-poor households for sustainable poverty reduction. At grassroots level, Mr. Mai Thanh Nam, Chairman of Farmer Associations in Vinh Hao commune, Vinh Thanh district (a district in Program 30A of Binh Dinh Province) also wonders that the difference between poor and near-poor households is little, thus it is difficult to select between them to offer preferential loans, which resulting in envies among selected people and others. 

Help poor households to rise

In fact, preferential credit is determined as a solution for sustainable poverty alleviation, some localities have already support near- poor households with loans. Job creation Fund of Ha Nam province offers loans to the near poor as to the poor. Labor export program of Lam Dong province lends to social policy beneficiaries with interest rates equal to ½ of interest charged to other subjects, the program covers near-poor households aslo, with subsidy from the provincial budget.

Mr. Le Van Chi, Director of VBSP Gia Lai provincial branch said: households just getting out of poverty households are in need of capital to maintain production and business, the branch has maximize utilization of funds from program of funding for production and business in disadvantaged areas to help near-poor households etc,. However, such solution applied to near-poor households is just scattered in some credit program, near-poor households is not yet considered as a formal beneficiaries of preferential credit.

New standards for poor households and near- poor households in the period of 2011 - 2015:
Rural poor households are households with an average income from VND 400,000 / person / month (from  VND 4.8 million / person / year) or less. Urban poor households are households with an average income from VND 500,000 / person / month (from VND 6 million / person / year) or less.
Rural near- poor households are households with average income from VND 401,000 to VND 520,000 / person / month. Urban near- poor households are households with average income from VND 501,000 to VND 650,000 / person / month.

On 10/7/2012, The Prime Minister has promulgated Decision No. 852/QD - TTg on approval of Development strategy for VBSP in the period of 2011 – 2020 which define social policy credit is a solution to broad-based and sustainable poverty reduction. In which, the general objective is identified as: develop VBSP towards stability, sustainability with sufficient capacity to well carry out social policy credit of the State; along with develop supporting products and services to better serve the poor, the near-poor and other policy beneficiaries.

Resolution No. 26/2012/QH13 of the National Assemblyon continuing to improve effectiveness and efficiency of policy

The National Assembly Resolution No. 26/2012/QH13 on further improvement of effectiveness and efficiency in implementation of policies, laws on investments in agriculture, farmers and rural areas also stated: increase capital for VBSP to increase loan amount, especially for livestock and poultry; extend target groups of VBSP to near-poor households, further develop rural industries etc,.

The direction is already there, it is necessary to deploy it to meet with aspirations of the people. Recently, in answering an interview with the press, Deputy General Director of VBSP, Mr. Nguyen Van Ly said: VBSP already has a draft plan on serving near poor households, loan amount and procedures will be as lending to the poor but interest rate will be close or equal to market rate. In this way, the state budget will not be affected because it will not have to subsidy interest charge, VBSP expenses will not increase significantly. The most important thing is that near-poor households would have access to loans and preferential services.

Ngoc Tu




Poor Households

Lending to poor households 6,6%/year
Lending to poor households in 64 poor districts as stipulated by the Government Resolution No.30a in 2008 3,3%/year

Near Poor Households

Lending to near poor households 7,92%/year


Lending to disadvantaged students 6,6%/year

People in need of loans for job creation

Lending to business establishments owned by war invalids and handicapped persons 3,3%/year


Term Deposit Rate
Overnight 3,04%/year
1 week 3,23%/year
2 week 3,5%/year