Mobilizing resources for policy credit

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Policy credit contributes to promoting economic growth and ensuring social security. Photo: VBSP

According to the World Bank (WB), the Bank for Social Policies (VBSP) is the largest microfinance service provider in Vietnam and one of the largest microfinance providers in Asia, is one of the few successful and sustainable models in the world. So far, VBSP is lending to over 6.5 million households (nearly one-third of Vietnam's population) with outstanding loans equivalent to more than 12 billion USD through a nationwide network. Through this network, VBSP has reached about 92% of total borrowers and accounted for 87% of total loans in Vietnam's microfinance market. Bad debt ratio is less than 1%.

In order to ensure that there is enough capital to implement policy credit programs, the National Assembly, Government, ministries, central branches and local authorities at all levels are always interested in mobilizing and concentrating resources to help them achieve their goals. VBSP improves financial capacity, operational capacity, is more proactive in implementing tasks and policy credit programs of the State, timely responds to capital sources to lend to policy beneficiaries (poor households, near-poor households, ethnic minorities, etc) in various forms.

According to the Ministry of Finance, by June 30, 2023, relevant agencies have arranged the central budget to provide VBSP 40,155 billion VND (including 23,960 billion VND of charter capital and 16,195 billion VND of funding for implementation of policy credit programs). Allocating the local budget to entrust to VBSP 34,527 billion VND to lend to policy beneficiaries in the area. VBSP is also allowed to borrow some preferential capital sources (such as borrowing capital from the State Treasury, borrowing from the Foreign Exchange Reserve Fund, refinancing loans from the State Bank, borrowing and receiving foreign entrustment) with a balance as of June 30, 2023 of VND 9,356 billion.

Along with that is creating conditions for VBSP to mobilize government-guaranteed bonds with a total issuance volume of VND 133,979 billion and the balance as of June 30, 2023 is VND 55,831 billion. State credit institutions also maintain deposits at VBSP with a total deposit and balance as of June 30, 2023 of VND 117,378 billion.

In addition to allocating capital for VBSP, since its establishment, the state budget has also allocated VND 27,755 billion to compensate the difference in interest rates and management fees for VBSP to effectively implement its assigned tasks.

The speech of Deputy Minister of Finance Nguyen Duc Chi, Member of the Board of Directors of VBSP sent to the national scientific conference "Social policy credit with implementation and social security assurance" recently organized by VBSP in collaboration with Ho Chi Minh National Institute of Politics, commented that the Party and State have always identified social policy credit as one of the important solutions in the implementation of national target programs and ensure social security. In the coming time, in order to further promote the effectiveness and efficiency of policy credit, the Ministry of Finance will continue to preside over and coordinate with relevant ministries and branches and VBSP to focus on implementing many solutions. In which, it will continue to coordinate to improve mechanisms and policies to create conditions to improve the operational capacity and financial capacity of VBSP to well implement policy credit programs, contributing to rapid and sustainable poverty reduction.

Also on this issue, Mr. Hau A Lenh, Minister, Chairman of the Committee for Ethnic Minority Affairs suggested focusing on mobilizing resources to well implement credit programs, in which central budget capital plays a key role, besides encouraging local budgets and other legal sources to participate in the implementation of social policy credits; take advantage of the resources of international organizations to supplement loans. At the same time, it is necessary to study and have a mechanism for VBSP to re-borrow foreign loans with more preferential regimes in terms of interest rates as well as access conditions; consider and raise the limit for issuing government-guaranteed VBSP bonds, creating conditions for mobilizing capital sources with long and stable terms.

Along with additional resources, according to experts, policy credit needs to improve the quality of capital. Mr. Do Ngoc An, Deputy Head of the Central Economic Commission, assessed that some policy credit programs have loan terms and loan levels that are not suitable with the reality of the development cycle of some perennial crops and livestock; the development of capital plans for a number of new policy credit programs has not been close to actual needs. The capital structure is not really reasonable and sustainable. Policy credit is mainly used for medium and long-term loans (medium and long-term loans account for 99.4%) with some programs with long loan terms, up to 25 years, etc.

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Therefore, the Deputy Head of the Central Economic Commission suggested that the supervision work must be carried out regularly, included in the annual program and plan, with a summary, assessment and gaining experience.