ENTREPRENEURS IN DISADVANTAGED AREAS

To execute Decision No 92/2009/QD- TTg dated 08/7/2009 of the Prime Minister on credit to traders doing business in extremely disadvantaged areas, the General Director of Vietnam Bank for Social Policies (VBSP) provides guidance on capital lending procedures of this Decision as follows:

1. SOME CONTENTS WHICH ARE UNDERSTOOD AND UNANIMOUSLY ADOPT:
2. Traders conducting commercial activities:

Traders including economic organizations which are established legally, individuals conducting commercial activities independently, frequently and having business registration.

1.1. Traders who are economic organizations include:

Stated - owned enterprises, private enterprises, partnerships, limited liability companies, joint-stock companies, co-operatives who have its ownl name, assets, permanent transaction head offices, and business registration for conducting commercial activities.

1.2. Traders who are individuals include:

- Traders who do not conduct accounting records, and pay flat-rate taxes under regulations of tax offices.

- Traders who conduct accounting records and declare taxes under the law.

2.Target borrowers:

- Traders ( herein after called “ borrowers”), conducting commercial activities frequently in extremely disadvantaged areas. The extremely disadvantaged areas includes communes, wards, towns which are listed in the attachment to Decision No.30/2007/QD – TTg dated 05/3/2007 of the Prime Minister on promulgating list of administrative units in extremely disadvantaged areas.

- Traders doing business at such communes which establishment are conducted after Decision No 30/2007/QD-TTg came into effect, based on separation or merger of administrative units listed as extremely disadvantaged areas.

3. Loan conditions:

To receive loans, borrowers shall have to conduct commercial activities frequently in disadvantaged areas and  satisfy following conditions:

3.1. Traders who are individuals:

Shall have business registration and certify of Commune People’s Committee on doing business frequently in the area.

3.2. Traders who are economic organizations:

Shall have business registration and certification of Commune People’s Committee on doing business frequently in the area.. If an economic organization opens a representative office or branch in disadvantaged areas, they must have an extra operation registration certificate.

3.3. Having owner capital at the minimum of 20% of total capital demands for business activities in disadvantaged areas.

3.4. Traders who borrow over VND 30 million have to have loan guarantee in accordance to VBSP’s instruction.

4. Owner capital includes:

4.1.Value of raw materials, facilities, goods, fertilizer, seeds, domestic animals etc,.

4.2. Value of land using right that borrowers own (defined by quoted local land price with reference to market price) . In case of renting, it is the amount paid for the remaining rent period.

4.3. Value of assets on land ( defined by market price), in case of renting, it is the amount paid for the remaining rent period.

          4.4. Value of working days that borrowers spend on the project.

          4.5. Vietnam Dong, foreign currencies, credit balance of deposit accounts in banks and other financial organizations, and other valuable certificates.

5. Loan term, loan extension, principal and interest payment schedule.

5.1 Loan term:

1. Short- term: loan term up to 12 months.
2. Medium and long term: loan term from over 12 months but not exceed 5 years at the maximum

The maximum of loan term shall not exceed the remained operating term of business registration lisence.  (if any).

5.2. Debt extension term:

1. The maximum term of debt extension is 12 months.
2. For medium- term and long – term loan, the maximum term of debt extension is ½ loan term specified in the lending contract.

5.3. Debt payment by installment:

- Payment in installment is not applied to Short-term loans and loans does not applicable to payment in installment.

 .- For loans of medium and long term which applied lending in instalment shall be applicable to payment in installment, each installment is 6 months or 1year/ time.

5.4. Interest payment:

- Loan interest is paid monthly.

6. Loan types:

-  Lending in instalment: each time get disbursement, borrower and local VBSP shall apply the lending procedures according to regulations and sign the lending contract ( credit book).

- Lending by credit line: local VBSP and borrowers  agree a credit line in a period of time ( applied to traders who are economic organizations). The determination of credit line based on the total value of goods transactions in the period minus (-) owners capital of the organisation but the maximum credit line shall not exceed VND 500 millions.

7. Loan size:

7.1. If borrowers are individuals who do not open a bank account and pay flat-rate tax according to tax office’s regulations: the maximum loan size is VND 30 millions.

7.2. If borrowers are individuals  who open a bank account and declare tax under provision of law, the maximum loan size is VND 100 millions.

7.3. If borrowers are economic organizations which are established legally: the maximum loan size is VND 500 millions.

8. Lending method:

8.1. Traders who are individuals: VBSP gives loans directly to borrowers via partial entrusted to mass organizations as applied to lending to the poor and other policies beneficiary. For areas where there are existed Savings and credit group (SCG), leaders of SCG shall hold meetings to recruit members to groups to help them to be eligible of  getting loans from VBSP.

With areas which have not have SCG yet, VBSP shall make agreement with local mass organizations to guide the establishment of SCG to facilitate borrowers proceeding lending procedures at VBSP.

8.2. Traders who are economic organizations, VBSP shall give loans directly at  VBSP office at province and district level.

9. Loan guarantee:

9.1. For loan size up to VND 30 millions, borrowers do not have to commit loan guarantee.

9.2. For loan size from over VND 30 millions to VND 500 millions, borrowers have to commit  loan guarantee following to VBSP’s regulations.

1. LENDING PROCESS AND PROCEDURE:
2. Traders who are individuals:

1.1. Lending documents:

1.1.1. Traders who are individuals who do not conduct standard accounting and pay flat-rate tax:

- Registered business license ( copy has confirmation or notary of Commune People’s Committee);

- Flat – rate paying tax’s notice of previous period of Tax Office ( copy has confirmation or notary of Commune People’s Committee );

- Proposal for Borrowing and Project of using loan (Sample 01/TD);

- The list of households who are eligible to borrow money from VBSP ( Sample 03/TD);

- The minute of Savings and credit group meeting (Sample 10/TD);

- Borrowing book.

1.1.2. Traders who are individuals that conduct accounting and pay taxes according to law regulations.

- Registered business license (copy has confirmation or notary of Commune People’s Committee);

- Tax Return or Tax Balance (copy has confirmation or notary of Commune People’s Committee);

- Proposal for Borrowing and Project of Using loan (Sample 01/TD);

- The list of households who are eligible to borrow money from VBSP (Sample 03/TD);

- The minute of Savings and Credit group meeting (Sample 10/TD);

- Borrowing book;

- Loan guarantee for borrowers who borrows over 30 million.

1.2. Lending process:

1. Borrowers shall write Loan proposal and Project of using loan ( sample 01/TD) and attach copies of the following documents: registered business license, notice of paying tax or Tax Return or (Tax Balance) then address to Savings and credit group (SCG).
2. SCG receiving document of borrowers, holding meetings to recruit members to groups, checking elements on Loan Proposal (Sample 01/TD) under the VBSP’s regulations and the beneficiaries are enough conditions to get loans according to Government’s policies. If documents are not sufficient, SCG shall guide borrowers to redo procedures or make supplement of missing parts. After that, SCG shall make a list of households who are eligible to borrow money ( Sample 03/TD) in attachment to defined documents at section a, point 1.2 of this document to send to Commune People’s Committee for approval.
3. After having Commune People’s Committee’s approval on the list of households who are eligible to borrow money ( sample 03/TD), the SCG shall send to VBSP these documents for approval.
4. After receiving these documents sent by SCG, the assigned staff of VBSP shall check the suffiency and correct of all documents and send to the Manager or leader of credit team; Director or leader of Credit team are responsible for checking the legally and validity of these documents to submit to Director for lending approval. After being approved, VBSP shall make an anouncement on lending approval ( Sample 04/TD) to send to Commune People’s Committee, and guide borrowers to fill in Borrowing book. In case, a borrower borrows over VND 30 millions, staff shall guide the borrower to make the contract of loan guaranttee according to regulations.
5. Commune People’s Committee shall inform the commune mass organizations ( who are the lending trustee) and these organizations inform SCG, SCG informs borrowers to come to transaction points at commune or the office ofVBSP to receive loans.

1.3. Disbursement, Debt collection, Interest collection:

Disbursement, debt collection and interest collection are as applied to lending to the poor, borrowers get loan directly at assigned office. In case borrowers cannot come to receive money, they can give the other member in their family a mandate to receive loan, the mandated person has to submit letter of attorney confirmed by the Commune People’s Committee.

For each disbursement, debt collection and interest collection, VBSP accountant shall fully write contents and ask the borrowers to sign in the Borrowing Notebook according to regulations. 

1.4. Inspecting, supervising and proccessing loan:

1. Savings and Credit group (SCG):

- SCGs are responsible for checking borrowing conditions when they get Proposal for Borrowing ( Sample 01/TD) from Borrowers to determine the beneficiaries.

- Monitoring, overseeing, and urging the borrowers frequently in SCG of using the borrowing capital with right purposes, paying the interest and debt at schedule as committed, witnessing and checking the disbursements , debt collections and interest collections.

- Together with mass organizations and staff of VBSP unifying the ways to handle the overdue debt, frozen loans to submit to Commune People’s Committee for treating .  

1. Mass organizations at Commune level:

- Steering and joining with SCG to hold Group meetings to evaluate publicily borrowers who have demand for loans and eligible to be listed in the list of households who offer to borrow money form VBSP ( Sample 03/TD).

- Inspecting and supervising the process of using loan using public check ( Sample 06/TD), informing in time any wrong purpose loan using cases, decamp case, died cases, missing cases or get risk by objective reasons ( natural calamity, epidemic diseases, fire) to VBSP to have timely measures.

- Co-ordinating with VBSP and local authorities to handle overdue debts. Guiding borrowers to complete documents to ask for treatment ofdebt suffering from risks by objective reason ( if any).

- Steering and supervising the Management Board of SCG in implementing the entrusted contract that signed with VBSP.

1. VBSP where give out loans:

- Checking The list of households who offer to borrow money from VBSP (Sample 03/TD) against The minute of Savings and Credit group meeting (Sample 10/TD). Verifying the legality of Loan Application according to  VBSP ‘s regulations.

- Prediodically or unexpectedly, VBSP’s leaders shall invite members in Representative Units of BOD at same level to implement checking and supervising the SCG’s activities, borrowers’ activities and junior level associations in executing credit policy and the effective of using loan of borrowers. .

- Dealing with due debt, overdue debt, appropriated loans,complete document to frozen debts suffering from objective causes ( if any) etc....

2. Traders who are financial organizations:

2.1. Borrowing document:

Including 3 types of document are: legal document, economic profile, loan application.

1. Legal document:

Depending on the type of economic organization, borrowers shall send to VBSP following documents: ( notralized copy):

- Enterprise Regulation, Co-operative Regulation (except Private Enterprise);

- Decision to appoint Board Chairman ( if any), General Director ( Director), Chief Accountant.

- Registered Business License. In case Financial Organizations opening representative offices or branches at disadvantaged areas, they have to have operation licence in addition;

- Work permit for commercial operation ( for example: Phamaceutical Business);

- Capital contribution Report, The list of Founding Members ( Joint stock- company, Limited Liability Company, General Partnership Company);

- Forms of registering seal sample, signature and opening accounts;

- The number of cooperative member, list of Management Board, Supervision Board ( for Co-operative);

- Document approved at Co-operative Established Meeting ( for Co-operative).

1. Economic profile:

-  The Periodical Business Plan;

- Financial Statement and  Business results of the preceding period.

1. Loan Application:

- Proposal for Borrowing and Project of using loan ( Sample 01/DNV &N);

- Project, Production and Business Plan, services ( borrowers make by themsevles);

- Profile of Loan Security under regulation;

- Assessment note, Reassessment ( Sample 02/DNV&N);

- Loan approval information ( Sample 04/TD);

- Credit Contract ( Sample 03/DNV&N);

- Minute after lending ( Sample 06/DNV&N);

2.2. Lending process:

1. Borrowers have loan demands shall write Proposal for Borrowing loans ( Sample 01/DNV&N) approved by Commune People’s Committee. Then borrowers will hand directly Loan Application to VBSP where give loan.
2. After receiving Proposal for Borrowing and Project of using loan ( Sample 01/DNV&N) and documents regulated at section a,b point 2.1, Part II of this document, credit staff will appraise according to Sample 02/DNV&N.

 Basing on appraised results of credit officers, manager of credit leader is responsible for checking the legally, validity of document or reappraise ( if needed ) to submit to Director for approval.

1. If approved for loan, assigned credit staffs shall guide borrowers to make the Loan Security Contract as regulated. If they are not to borrow, staff shall make notice as Sample 04/TD to send to borrowers.
2. After completing loan security procedure as regulated, borrower and VBSP will make Credit Contract ( Sample 03/DNV&N). Borrowers have rights to make their choice and agree with VBSP to apply one of two lending methods: installments or credit line .

2.3. Disbursement:

For borrowers who are financial organizations have to opening deposit account at VBSP where give loan to implementing forms of non – cash payment and repayment of bank.

Borrowers get loans directly at assigned office. If they cannot come to receive money, they can give other member in family a mandate to receive loan by approved document of local leader.

For each loan disbursement, the Bank disburse directly in cash or bank transfer following to request of borrowers.

Incase loan disbursed under the norm: Each time receiving loan, borrowers shall write debt paper, the total amount of the debt this time plus (+) outstanding that does not exceed the maximum limit approved. Bank shall disburse directly in cash or bank tranfer at the request of borrowers.

2.4. Collecting debt, interest:

Principal debt collection is implemented directly at the VBSP’s office where give loan. If borrowers use lending line, they can pay debt directly to loan account or deduct from deposit account to pay debt daily or pay debt according to business cycle.

Debt collection is carried out monthly at VBSP where give loan.

Each time of collecting debt and interest, accountant of bank where give loan shall make a receipt note. Basing on document, accountants record in VBSP database and borrowing document of borrower as regulations.

2.5. Supervising, overseeing and handling loan:

2.5.1. Content of supervising and overseeing loan:

VBSP is responsible for supervising and overseeing loan process, purpose of using loan and paying of borrowers in order to speeding up borrowers to implementing correctly and sufficiently commitments of credit document, the contents are as follow:

1. To Check before lending: is appraising or reappraising borrowing conditions under regulations.

b.To Check while lending: is checking the fully, legally, validity of lending document and vouchers, the match between identity card and borrower, the beneficiary and the person named on the written request for loan....

c.To Check after lending:

-  To check  the purpose of using loan written in credit document;

- To check the project progress, production plan, business and services;

- To check the situation of loan security assets and secured loan profile ( Sample 06/DNV&N).

1. Checking results have to be written in checking record after giving loan to monitoring and managing ( Sample 06/DNV&N).

2.5.2. Handling loan:

Basing on the checking results and depending on the seriousness of borrowers, VBSP shall decide to revoking/recovering  debt before term or move to overdue debt  and tackling as follow:

1. To temporarily suspending:

In case the borrowers use loan with wrong purposes, providing incorrect information..

1. To terminating loan: in case the borrowers break the committed credit contract but do not repair or fix; borrowers stop producing may lead to bankruptcy; process of reproduction cannot determine who is responsible before the law for the relations of borrowing loan and repaying debt.
2. To sue before law:

- Borrower breaks the credit contract, loan security contract, informed by document by lender but do not recover;

- Borrower has overdue debt due to subjective reason but does not have feasible method to pay bank’s debt;

- Borrower has financial capacity to pay debt but intentionally evade bank debt obligations under the agreement;

- Borrower has defraud or deceptive behavior;

- Other offends as regulated by law.

3. Procedure for loan security:

Procedure for loan security is implemented according to the guidance of loan security of VBSP at Document No. 2478/NHCS -TDSV dated 04/9/2009 by VBSP’s General Director on guiding the implementation of measures to ensure the loan system of VBSP.

4. Handling due debt:
5. On debt schedule, borrower is responsible to pay fully principal debt and interest to VBSP.
6. The adjustment of term debt:

- Refer to medium and long term loan which loan size is under VND

30 millions , borrowers meet difficult and have not pay principal debt on term debt, VBSP shall consider at the next term debt ( do not transfer to overdue-debt of each term).

- Refer to medium and long term loan with loan size from over VND  30 millions to  VND 500 millions, in case borrower does not pay principal debt timely, they have to write  requests for adjustment term debt ( Sample 08/DNV&N for economic organizations and Sample 08/TD for borrowers who are individual) before 5 days to send to  VBSP where give loan for consideration and adjustment of the next term debt.

1. Loan extension: Before 5 days of the last term of loan term repayment, if borrower can not pay debt due to objective reasons, they shall have Proposal for loan Extension ( Sample 09/ DNV&N for economic organization and Sample 09/TD for borrowers who are individual) then send to VBSP where gives loan for considering of loan extension.
2. Transferring overdue debt:

- By the term of repayment for loan over VND 30 millions, if they are not considered by bank for debt adjustment shall transfer the due loan of this term to overdue debt.

- By the time of the last debt payment,  if borrower does not repay the debt and VBSP does not approve for loan extension, outstanding debt shall be transferred to overdue debt.  

- For cases which borrowers use capital with wrong purpose, VBSP where give loan shall revoke debt before term or transfer all principal outstanding loan to overdue debt.

When transferring to overdue debt, VBSP where give loan shall inform to borrower ( Sample 05/DNV&N for financial organizations, Sample 14/TD for individual borrower).

6. Handling risk debt due to objective reason:

The handling risk debt due to objective reason is implemented according to risk debt regulations of VBSP system.

7. Recording loan application:

VBSP shall record loan application as regulated, ensure absolute security. Assigned person to maintenance records must be responsible before law if lost, misplaced or modified the contents of the dossier.

7.1. Credit Department keeps: Economic Profile of borrowers.

7.2. Accounting Department keeps: Legal Document, Loan Application and other vouchers of borrower. Loan security’s documents of borrower are recorded under VBSP’s regulations.

Refer to document kept by accountant, Credit Department and other Department  will copy as original one if needed and shall have permission of  Director or assigned person.

III. IMPLEMENTATION

1. Working plan:

Every year, VBSP’s branches shall make capital demand for traders doing business at disadvantaged areas  to send directly to senior branches under the current regulations of VBSP.

2. Accounting:

Accounting of credit for traders doing business at disadvantaged areas  is accounted and monitored under the VBSP’s regulations.

3. Statistical reporting:

Monthly, on the 07th, VBSP at province’s branch will make and submit reports according to Sample No.02.10/BCTDSV-TNVKK attach this document and complementing column 29 and 30 on the classified report of entrusted outstanding ( Sample 05/BCTD) to HQ.

4. VBSP at local branches which have communes at disadvantaged areas on the issued list and attached to Decision No. 30/2007/QĐ-TTg are responsible for reporting to the People Committee and Provincial and District Representative Units of BOD to implementing the Decision No. 92/2009/QĐ-TTg and guidance of the General Director in this document.
5. To hold and deploy the content of Decision No.92/2009/QĐ-TTg and professional training the content of this document to the VBSP’s officers, social-politic organizations officers, leaders of Savings and Credit group and Communal People Committee’s staffs to implementing the lending program as regulations.
6. To advise People’s Committee at all level, entrusted social- politic organization to propagandize and publicize guidance and policies on lending to traders doing business at disadvantaged areas according to Decision No.92/2009/QĐ.
7. This document is effective from the date of signing. Points that are not guided in this document, VBSP shall implement according to the content of Decision No.92/2009/QD-TTg dated 08/7/2009 by the Prime Minister on credit to trader doing business at disadvantaged areas.

On the implementing process, if have any issues, please inform to HQ for considering and solving./.