Following the Workshop on microfinance activities in the Southern provinces held in Ho Chi Minh City on September 11, in the morning of September 13, 2019 in Hanoi, the State Bank of Vietnam (SBV) in collaboration with the Asian Development Bank (ADB) organized a Workshop on microfinance activities in the Northern provinces. SBV First Deputy Governor Dao Minh Tu chaired the Workshop.
Also attending the Workshop were Mr. Eric Sidgwick - ADB Country Director in Vietnam, Mr. Nguyen Trong Du - Deputy Chief Inspector of the Banking Supervision Agency, and other leaders of the International Cooperation Department, the Communications Department, the Banking Supervision Agency, and representatives of the SBV branches in the Northern provinces. There were also other representatives from the Government Office, the Ministry of Planning and Investment, and the Ministry of Finance; representatives of the People's Committees, the Provincial Departments of Internal Affairs, Departments of Finance, microfinance institutions (MFIs) of the Northern provinces; together with members of the microfinance working group.
SBV Deputy Governor Dao Minh Tu delivered the opening remarks
In his opening remarks, Deputy Governor Dao Minh Tu said that in recent years, microfinance activities have made positive contributions as an effective tool, creating opportunities for the poor/low-income people to access financial services, repelling black credit in the remote areas in accordance with the policy of the Party and the Government. However, besides the achievements and contributions to the country's poverty reduction, MFIs, microfinance programs and projects are still facing difficulties/challenges, especially towards the goals of sustainable microfinance development in general and institutional sustainability for each organization in particular.
In fact, the legal framework and regulations related to MFIs have been increasingly improved, paving the way for sustainable microfinance development. Accordingly, the Law on Credit Institutions No. 47/2010/QH12 has confirmed for the first time that MFIs are a type of credit institutions in the Vietnamese system of credit institutions. It can be said that the operations of MFIs under the regulations of the Law on Credit Institutions and the guiding legal documents is a step forward in the field of microfinance. This is a solid legal foundation to consolidate and develop stable operations of the microfinance sub-sector in Vietnam.
Besides, in order to provide guidance for Clause 6, Article 161 of the Law on Credit Institutions, on June 12, 2017, the Prime Minister signed for issuance Decision No. 20/2017/QD-TTg regulating the activities of microfinance programs and projects of political institutions, socio-political organizations and non-governmental organizations (Decision 20). This Decision 20 is considered a step in the right direction, meeting practical requirements and has created the premise for the State management agencies to have a consistent basis for the management of microfinance programs and projects which are going on in a small scale, diverse and widespread manner nationwide.
The issuance of Decision 20 created the first legal basis to provide specific guidance on the operations and scope of activities for microfinance programs and projects. With the guidance and adjustments of Decision No. 20, in general, the activities of microfinance programs and projects have been gradually improved towards professionalization, quality improvement, and efficiency for further contributing to the process of hunger elimination and poverty reduction, creating jobs, developing production and business, improving the lives of the members in the local areas, especially in agriculture, rural areas, remote and mountainous areas.
Mr. Eric Sidgwick - ADB Country Director in Vietnam speaks at the Workshop
Sharing the same views with the SBV Deputy Governor, Mr. Eric Sidgwick - ADB Country Director in Vietnam affirmed the important role of microfinance and financial inclusion as the main factors to reduce poverty and to ensure economic growth. With the commitments of the Vietnamese Government in developing a vibrant and sustainable microfinance sub-sector in order to promote financial inclusion (through the approval of Vietnam Microfinance Development Strategy in the period of 2011-2020 and the development of the National Financial Inclusion Strategy), the ADB has assisted the Government in developing and implementing a national microfinance strategy with a focus on creating a favorable policy and a management environment for the microfinance industry, strengthening the supervisory capabilities, developing the institutional activities and building the financial infrastructure.
The ADB Country Director in Vietnam said that with the issuance of Decision 20, for the first time, the Government of Vietnam has formalized the legal framework on microfinance projects and programs operated by political, socio-political organizations and non-governmental organizations, in addition to the implementation of the SBV's licensing regulations and the formalization of the microfinance operations. Up to now, more than 70 microfinance programs have been granted registration certificates; microfinance activities have been improved and achieved many positive financial results. A number of large microfinance programs are preparing for transformation into formal MFIs under the supervision of the SBV.
Through the management of microfinance programs and projects, the SBV has recognized a number of issues with the microfinance programs and projects during the implementation of Decision 20, for example: the legal basis for determining whether grassroots units and organizations of a socio-political organization is a socio-political organization to register microfinance programs and projects, as prescribed in the Decision 20; sanctions for when micro programs and projects have not complied with the provisions of Decision 20.... Although formal MFIs have to comply with the SBV's safety regulations and supervision, it is necessary to supplement certain regulations and safety supervision requirements to microfinance programs, especially those that are allowed to mobilize deposits from the people and act as financial intermediaries. Rules and regulations must be tailored to the specific characteristics of each microfinance program in order to achieve a reasonable balance between prudential regulations and supervision, facilitating the businesses for microfinance programs and projects.
Stemming from the above-mentioned practices, the SBV Board of Management has reported and been allowed by the Prime Minister to assume the prime responsibility and coordinate with the concerned organizations to conduct a 2-year review of the implementation of Decision 20, which clearly specifies the difficulties and issues for submission to the Prime Minister in order to consider possible amendments and supplementations to Decision 20 to match with the practical situations.
In that spirit, the SBV has worked with the ADB to organize Workshops on microfinance activities in Ho Chi Minh City and Hanoi. Within the framework of the Workshops, the participants focused on exchanging and discussing the difficulties and obstacles in the process of implementing Decision 20, and shared international best practices and examples in microfinance programs and projects management in various aspects.
Deputy Governor Dao Minh Tu emphasized that the comments and ideas of the participants at the Workshop would provide the SBV with more theoretical and practical basis to summarize, evaluate and propose amendments to Decision 20 with the aim of creating a healthy environment for microfinance programs and projects in order to become safer and more effective, better serving microfinance customers who are the poor, low-income people, and promoting production and improving their living standards.
VA