microfinance in vietnam
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5/26/2018 Microfinance in Vietnam
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The Role of NGOs in
developing MicrofinanceinVietnam
Chung
ECON 462
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Key principles of
microfinance(Consultative Group to Assist the Poor, 2004)
!Government enables, not providedirectly NO
!Pay for itself (sustainable) NO
!Build permanent local institutionsNO
!Integrated into the mainstream financialsector NO
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Overview!Vietnam: market-based reforms, 1980s
!Poverty rate from 58.1% (1993) to19.5%(2004)
!1980s: Microfinance introduced by NGOs
!1990s: State banks
"Vietnam Bank for Agriculture and RuralDevelopment (VBARD)
"Vietnam Bank for the Poor (VBP)
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MF environment!2005: Decree 28
!International NGOs not allowed to set up
financial institutions!Can only contribute capital jointlywith
legal domestic organizations
!57 international NGOs
!With socio-political organizations, Women
Union (WU)
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Market share
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My paper! Economic problems
1) Unhealthy competition
2) Institutional Conflict
3) No integrated network
! Role of NGOs
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Economic Problem 1:
Unhealthy Competition Microfinance: Government supported
social welfare program
Policy lending Bank: VBP
#crowd out current NGOs
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EvidenceInterest rate (as of December 2004)
"VBP: 0.5%
"Oxfam: 1.5%
"Save the Children: 1.5-1.7%
#Only credit-worthy households can benefit
#NGO: no financial sustainability
Eg: Save the Children/ UK (SC/UK)
5-year Poverty Alleviation Program but didnt
sustain
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Role of NGOs: Face competition Improve schemes: best practices
#serve no-collateral clients
SC/USSolidarity Group
SC/Japan, Plan
International, WVI
Village Bank
Vietnam Plus,
Action Aid
Grameen Bank
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Role of NGOs: Face competition!Lobby for changes
Eg: 2002, when VBP was established
" 7 NGOs against subsidized interest rates:FAILED
!Improve public information about different
schemesEg: SC/UK program: shown at least 3 times on
Vietnamese National Television
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Economic problem 2:
Institutional conflict!Women Union (WU): oversees programs
funded by international NGOs
#headquarter-subsidiary conflict
"HQ: financial sustainability
"Subsidiary-Local: poverty reduction
#Hard to go from infant to mature state
#Mean technical EFFICIENCY: 69%-78%
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Evidence WU staff: knew nothing about
microfinance management
Mission-Market tension
"HQ: high IR
"Subsidiary: follow state banks
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Role of NGOs: Resolve Conflict!Expatriate management
!Training/ Building capacity
Bottom-up influence
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Economic Problem 3:
No Integrated sector!Lack of networking
"NGO: multi-purpose
Eg:global SC/UK strategy: microfinance is nottop priority
"WU: same
SEGMENTED MARKET
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Role of NGOs: Improve Network 2004, Microfinance Working Group
(MFWG) formed
email list serve, regular meetings, semi-annual microfinance newsletters
#Representative voice
#Should turn into a formal association
National Strategy: Integration intooverall financial system
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Conclusion!Paradox of sustainability: rests more on
social and political considerations than
on economic ones (Devine, 2003)
!Role of NGOs: crucial
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