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The People's Credit Fund contributes to reducing black credit risks in rural areas. Photo: Internet

People's credit funds have developed in the right direction

According to the State Bank of Vietnam (SBV), by the end of April 2023, the whole system had 1,180 people's credit funds operating in 57 provinces and cities.

SBV Deputy Governor Dao Minh Tu assessed that, in recent years, basically, the operation of people's credit unions is safe and healthy, and some places with limitations have also been detected and rectified soon. Many funds have development in the right direction, more stable.

The total assets of the entire People's Credit Fund system reached nearly 171,000 billion VND, up 4% compared to December 31, 2022. Customer deposits reached nearly VND 151 trillion, up 6.2%; total outstanding loans reached more than VND 131,100 billion, down 1.4%; equity reached more than VND 11,855 billion, an increase of 1.2% compared to the end of 2022. The bad debt ratio was recorded at 0.67% of the total outstanding loans, while in 2021 and 2022 the bad debt ratio is at 0,64%.

During a meeting in early July 2023 on strengthening the management of the People's Credit Fund system, the Standing Deputy Governor of the State Bank Dao Minh Tu said that banking activities are currently facing many difficulties due to the impact of the global economy, both domestic and international. Many issues need to be resolved now, such as promoting credit growth when the economy's capital absorption is weak, and at the same time controlling inflation and ensuring system safety. Therefore, the banking industry determines that ensuring the safe and healthy operation of the People's Credit Fund is a regular and continuous job.

However, the management of the people's credit fund system still has some shortcomings and limitations when there are still a number of weak people's credit funds, including the people's credit funds that must be put under special control. The handling of legal entities of people's credit funds is complicated and unprecedented work, so the processing process takes longer than expected. Many difficulties and obstacles in the operation of the People's Credit Fund in some localities have been slow to be resolved.

According to experts, the People's Credit Fund operates effectively and practically, helping to serve the people's socio-economic life, limiting the "black credit" raging in residential areas, especially in rural areas. But people's credit funds are increasingly under competitive pressure from financial companies, especially from commercial banks in both capital mobilization and lending. Due to their small size, these funds do not have the variety of deposit products or the financial capacity to carry out promotions like commercial banks.

Need to handle limitations, complete the legal corridor

Currently, the operation of people's credit funds is under the management of Circular No. 21/2019/TT-NHNN issued on November 14, 2019, by the SBV amending and supplementing a number of articles of circulars on cooperative banks, people's credit funds and funds to ensure the safety of the people's credit fund system (Circular 21).

In a petition sent to Deputy Prime Minister Le Minh Khai recently, the Union of Cooperatives (Cooperatives) pointed out some difficulties and obstacles of Circular 21 to the operation of people's credit funds.

The Vietnam Cooperative Union said that the regulation that "the area of operation of the People's Credit Fund is a commune, a ward or a town" is limiting the activities of the funds because the regulations on the operation of the funds are the same as Cooperatives (self-reliance, self-responsibility for their activities according to the law) but cooperatives are not limited in area and scope of activities like funds.

Therefore, this regulation not only restricts the functions and powers, reduces the autonomy and healthy competition of the People's Credit Fund with other credit institutions in the locality, but also causes many difficulties for the operation of People's Credit Funds. Many funds have been operating for many decades, operating in many communes, wards, and townships, now they have to be narrowed, leading to internal disunity, complaints, and loss of trust among members.

In addition, the regulation that the People's Credit Fund must ensure that the total deposit receipt cannot exceed 20 times the equity is also considered by the Vietnam Cooperative Union to cause many difficulties and hinder the need for cooperation and capital contribution, mobilizing idle capital from the people of the fund, restricting the development of a collective economic organization, which is not compatible with the objective laws of the market economy.

Also on this issue, banking, and financial expert Dr. Nguyen Tri Hieu said that the People's Credit Fund has been playing a significant role in the sustainable development of the rural economy, ensuring the goal of a comprehensive financial strategy.

Mr. Hieu said that the State Bank should expand the operation area of the People's Credit Fund into a province because if it is too narrow, it will increase the risk because the number of people borrowing is limited, especially those who cannot borrow will find black credit. He also stated that the regulation to ensure that the total amount of deposits cannot exceed 20 times the equity is unreasonable. People's credit funds can mobilize as much as possible, but lending out should be limited provided that the fund must ensure liquidity, and be able to pay and pay interest to customers when due.

In order to ensure the safe and effective operation of the People's Credit Fund system, in accordance with the principles, purposes, operating principles, and provisions of the law, Deputy Governor Dao Minh Tu suggested that the units should consider the work of continuing to correct and strengthen the safe operation of the people's credit fund system is a regular and urgent task. The Deputy Governor requested the banking inspection and supervision agency to continue studying and perfecting the legal corridor; focus on expeditiously handling the shortcomings, limitations, difficulties, and problems.