Microfinance in Vietnam: A Survey of Schemes and Issues
This report follows on from a survey of microfinance activity carried out in Vietnam 1996 by the UNDP and highlights both a number of problems and advances made by microfinance in Vietnam in recent years. Progress made includes:
- Greater interest from larger multi-lateral donors in funding microfinance activity;
- Government allocations of significant funds for the rural banking system;
- Government involvement in developing experiments with new forms of credit cooperatives and post office savings.
However, the author states that the donor community has largely neglected microfinance and the NGO community has been frustrated by a lack of institutional support. Whilst the conditions of "social capital" in Vietnam are ripe for the rapid expansion of microfinance schemes along the lines of those in Indonesia and Bangladesh it lacks a clear legal status and a prudential regulatory framework to encourage development of the non-state sector to provide microfinance services. NGO schemes have constrained themselves and their activities in microfinance largely acquiesce to government interest rate policies subsequently neglecting savings mobilisation. In conclusion, the document suggests that there in order to make use of the potential for expansion into Vietnam's segmented and inefficient rural financial markets the following would be needed:
- Schemes to promote financial sustainability based upon mobilising savings;
- A detailed understanding of these markets, and the role of the government banks, in order to guide scheme designs and to enable targeting of the poor;
- A pro-active microfinance forum to act both as a source of information and research, and a focal point for policy advocacy.
