The 20th anniversary of founding the Bank for the poor - the predecessor of Vietnam Bank for Social Policies (31/8/1995 – 31/8/2015)

During 1990s, Vietnam was among countries with high poverty rate, approximately 59% of the population (based on survey data of the World Bank). Lack of working capital was the main reason for poverty, whereas bank’s credit and State’s credit were all under management of State-owned commercial banks with such procedures and lending method that discouraged the poor to access loans.

Therefore, since the beginning of March 1995, Vietnam Bank for Agriculture and Rural Development (VBARD), the State Bank of Vietnam (SBV) and Foreign Trade Bank of Vietnam (Vietcombank) contributed to build Fund for Concessional lending to the poor with total capital of 400 billion dong initially. The Fund was managed by VBARD to lend to the poor with lower lending interest rate than commercial rate and no collateral. After 5 months of deployment, the Fund lent to nearly 500 thousands poor households throughout the country. However, capital of the Fund was so small to meet with huge number of poor households, which was nearly 4 million, leading to evenly split of lending capital. As the result, in some provinces, each poor household can borrow around 200 thousands, the effectiveness of the program therefore was not evident.

Upon changes over the course of economic- society development and to overcome the limitations of the Fund for concessional lending to poor households, on 31^st March 1995, Prime Minister Vo Van Kiet signed Decision No.522 /TTg on the establishment of the Bank for the Poor. According to reports, after 7 years of operation (1995-2002), from just 518 billion VND transferred from the Fund for concessional lending to the Poor, total capital of Bank for the Poor reached 7,083 billion VND and helped over 644 thousand households to get out of poverty. According to Dr. Ha Thi Hanh - former General Director of Bank for the Poor and also the first General Director of VBSP, the biggest advantage of Bank for the Poor model was cost-management as the bank could use available facilities, human sourceso of VBARD. However, the model, in fact, was like a concessional fund managed by VBARD with part-time Board of Directors, besides, staff of VBARD concentrated more on commercial activities and paid less attention to credit for the poor etc,.

As per requirements of integration and banking system restructuring and for gradually separating policy credit from commercial credit, on 4^th October 2002,  the Government issued Decree No. 78/2002 / ND-CP on Credit for the poor and other social policy beneficiaries; later, Prime Minister Phan Van Khai signed Decision No. 131/2002 /TTg to establish VBSP based reorganization of Bank for the Poor to implement Decree 78 and to focus funding sources for the poor and other policy beneficiaries into an organisation. VBSP receives assets and credit for the poor program from VBARD, job creation program from the State Treasury, disadvantaged students from Vietin Bank and other fund transferred from local state budgets, totaling nearly VND 10,000 billion.

As of June 2015, VBSP network operation has been built from central to grass root level with 63 branches, provincial, 626 transaction offices and nearly 11 thousand commune transaction points. Total funding resources reached over VND 141,000 billion VND, loan outstanding is 136,000 VND loans which increased almost 18 times as compared to the time of establishment. Delinquency decreased from 13.75% down to 0.44% of total loans.

Policy credit has helped more than 3.6 million households overcome poverty and created jobs for 11.8 million people (out of which over 104 thousand employees go  to work for a period abroad), built up 6.6 million RWSS projects, supported 3.3 million disadvantaged students to continue their study, built 484 thousand houses for the poor and policy households, 700 huts to avoid floods , over 102 thousand houses over flood for households in Mekong river delta etc,. With such achievements, VBSP was appreciated by the Party, the Government and the people, the bank was commented by National Assembly as a "bright spot" and one of the "pillars" in the system of poverty reduction policies in Vietnam.

Updated 5th October 2015