Press release on the issuance of Circular No.03/2018/TT-NHNN
Hanoi, February 23, 2018 – The Governor of the State Bank of Vietnam (SBV) issued Circular No.03/2018/TT-NHNN on licensing, organization and operations of microfinance institutions (Circular No.03/2018/TT-NHNN) to guide the Law on Credit Institutions, which provides the legal basis for the issuance of licenses, organization and operations of microfinance institutions.
The Circular No.03/2018/TT-NHNN takes effect from April 15, 2018 replacing regulations on licensing, organization and operation stated in Circular No.02/2008/TT-NHNN dated April 02, 2008 guiding the implementation of Resolution No.28/2005/ND-CP dated March 09, 2005 on organization and operations of microfinance institutions in Vietnam and Resolution No.165/2007/ND-CP dated November 15, 2007 amending, supplementing and abolishing a number of Articles of Resolution No.28/2005/ND-CP dated March 9, 2005.
The Circular No.03/2018/TT-NHNN includes 40 Articles, which divided into 07 Chapter, as follows:
Chapter I: General provisions
Chapter I includes 6 Articles (from Article 1 to Article 6) stipulating the scope of regulation, the subjects of application and interpretation, the competence bodies to decide the granting of Licenses, fees for granting Licenses and the preparation and submission of dossiers.
Chapter II: Regulations on licensing:
Chapter II includes 9 Articles (Article 7 to Article 15), which divided into 4 Sections.
Section 1 includes 2 Articles (Article 7 and Article 8) specifying conditions for licensing, ownership, founding members of microfinance institutions.
Section 2 includes 2 Articles (Article 9 and Article 10) providing for the dossiers and order of granting licenses to microfinance institutions as one-member limited liability companies.
Section 3 includes 2 Articles (Article 11 and Article 12) providing for the dossiers and order of granting licenses to microfinance institutions which are limited liability companies with two or more members.
Section 4 includes 3 Articles (Article 13 to Article 15) providing for dossiers and order of licensing in case of transformation of microfinance programs or projects and inaugurates operation.
Chapter III: Organization, management, administration and control
Chapter III includes 11 Articles (Article 16 to Article 26), which divided into 3 Sections.
Section 1 includes 4 Articles (Article 16 to Article 19) stipulating the names, head offices of microfinance institutions, capital contributors, organizational structures for management, Management Committee and Personnel Committee.
Section 2 includes 4 Articles (Article 20 to Article 23) stipulating the criteria and conditions for managers and executives, members of the Control Board of microfinance institutions.
Section 3 includes 3 Articles (Article 24 to Article 26) providing for dossiers, order and validity period of the approved list of planned personnel of microfinance institutions.
Chapter IV: Charter Capital, Capital Contribution Ratio and Transfer of Capital Contribution, Repurchase of Capital Contribution of Microfinance Institutions
Chapter IV includes 5 Articles (Article 27 to Article 31) regulating charter capital, forms of charter capital contribution, ratio of ownership of capital contribution, acquisition and transfer of capital contribution.
Chapter V: Regulation on Operation of microfinance institutions
Chapter V includes 5 Articles (Article 32 to Article 35) regulating the operation contents, operation duration, operating areas of microfinance institutions and the classification of debts, appropriation and use of reserves to deal with risks in the lending activities of microfinance institutions.
Chapter VI: Responsibility
Chapter VI includes 5 Articles (Article 36 and Article 37) defining the responsibilities of the Banking Inspection and Supervision Agency and the State Bank branches in provinces, cities under the management of the State Bank of Vietnam.
Chapter VII: Implementation
Chapter VII includes 3 Articles (Article 38 and Article 40) on the transitional provisions, the enforcement effect and the implementation of the Circular.
Some basic contents of Circular No.03/2018/TT-NHNN as follows:
Firstly, regarding the transformation of microfinance programs or projects
As stipulated in the draft Decision No.20/2017/QD-TTg issued by the Prime Minister on June 12, 2017 regulating the operation of microfinance programs and projects of political organizations, social organizations, non-governmental organizations guiding Clause 6, Article 161 of the Law on Credit Institutions (Decision No. 20), microfinance programs and projects may be transformed to official microfinance institutions. Conditions, dossiers and procedures for transformation are implemented in accordance with the Circular on granting License of establishment and operations of micro-finance institutions.
Second, about conditions and orders of granting license
The Circular stipulates conditions of granting license to two subjects: (i) newly-established micro-finance institutions; (ii) micro-finance programs and projects transformed to micro-finance institutions in line with Decision No.20 of the Prime Minister. Conditions for granting license on the basis of relevant regulations of Law on Credit Institutions, including: having charter capital equal to the legal capital set by the Government; meeting requirements related to the owners, founding members, managers, board of control; having Charters in line with Law on Credit Institutions; having feasible business plans for the first three years of operations. However, the new Circular stipulates the orders of granting license applicable to newly-established micro-finance institutions and micro-finance institutions transformed from micro-finance programs and projects.
- For newly-established micro-finance institutions, the order of granting license consists of two steps: (i) step 1: approving in principle the establishment; (ii) step 2: granting license.
- For micro-finance programs and projects transformed to micro-finance institutions, the order of granting license consists of one step, the step of approving in principle the establishment is not required to be implemented.
Third, about standards and requirements of managers and members of Board of Control
The Circular stipulates standards and requirements of managers and members of Board of Control of micro-finance institutions on the basis of the 2010 Law on Credit Institutions and Law on amending and supplementing the 2010 Law on Credit Institutions as well as appropriate regulations of Circular 02, however revising and supplementing conditions and requirements of General Directors (Directors) of micro-finance institutions.
Forth, about regulations on founding members, capital contributors and ratio of capital contribution
The Circular entails a large number of appropriate regulations of Circular No.02. However, the Circular only permits the domestic institutions and individuals and foreign banks to contribute capital to establish micro-finance institutions.
Fifth, about micro loan outstanding for a customer, total loan outstanding of all credit extension for an individual and household with low income, and micro enterprises
The Circular stipulates that micro-finance institutions must maintain the minimum ratio of 90% for the total loan outstanding to micro finance customers out of the total loan outstanding (the currently minimum ratio is 65%), at the same time, raising the level of loan outstanding to a micro finance customer to VND 50 million (the current level is VND 30 million). At the same, in order to support micro finance customers who overcome the poverty, micro-finance institutions are allowed to provide maximum loan of VND 100 million to the above-mentioned customers.
Translated by VA-LH