People’s Credit Fund, an Efficient Model of Economic Cooperation

Contribution to poverty elimination in rural areas:

Representative of Thanh Binh People’s Credit Fund addresses the conference held by Cooperative Union

    Since its establishment with the first three People’s Credit Funds namely Xuan Truong, Trung Dung and Tan Buu, so far 30 funds (including 27 ones in place, 3 others with business certificates) have been set up. By late 2008, they got total capital of VND420.8 billion (23,926,764US$), out of which the loan reached VND361billion (20,526US$). Mr. Quach Anh Bong – deputy director of Vietnam State Bank (Dong Nai branch) said: “Thanks to stable source of capital, People’s Credit Fund solved the insufficiency in production capital and has become a firm fulcrum for small-sized households instead of borrowing from commercial banks. Therefore, thousands of farmer homes have received capital for production machinery as well as plants and domestic animals.

    Since its establishment, Xuan Truong People’s Credit Fund has regarded agricultural and rural areas as major market, and farmers as traditional customers. Therefore, it constantly drives its branches close to the locals so that it could offer best on-demand services. To date, it reached a total capital of 37.023 billion and lent 22 thousand borrowers. Due to the loan provided by the fund, numbers of poor households eliminate their poverty and even get rich. Typically, Nguyen Huu Dai family in Cha Rang hamlet Suoi Cao commune, a particularly poor family without production capital, loaned VND20 million (1,137US$) to buy cashew and mango plantations and hire laborers. Now he owns a 10-hectare plantation with annual income of VND150 million (8,529US$). Another example is Phi Cong Than in Gia Ray town; he decided establishing a grain processing firm after lent VND30 million (1,706US$) by the fund. Just five years later, his family afforded to build up two other firms and five hectares of land for forestation.

    “We insist that what benefits famers is able benefit the fund; hence we have been trying to simplify lending formality so as to save farmers’ time and cost,” said Le Cam, director of executive board of Xuan Truong People’s credit fund.

Ceaseless innovatition for better service:

Delegates raise difficulties undertaking their duty

    Over 15 years of its operation, however, People’s credit fund system encountered a wide range of challenges. The most difficult issue is majority of them are small-sized, lack of capital, management capacity, etc. that have caused insufficient operation. Mr. Bong admitted; “social economic effect brought by the fund is great. However, it is undeniable that the fund performance is facing drawbacks on human resource, technology, management and market. It is the fact that proportion of its staff aged 55 to 60 occupies 40% meanwhile young staffs are not well-trained and face experience insufficiency and lack of advanced technology application ability and so forth.

    Ms. Duong Thi Thuy Hang – director of Nhon Trach People’s Credit Fund told us: “In this current circumstance, interest rate is fairly equal to that of commercial banks while banks’ loans get billions of Dongs so 0.1 is adequate for the cost, but the fund with a few tens of thousands of Dongs, it is a problem. Beside its infrastructure is not adequate and professional skill of its staffs still remains certain limitation, which needs government’s assistance.” 

    According to report by Vietnam State Bank – Dong Nai branch, out of 27 funds under operation, only 16 ones could have good infrastructure and only five others affordable to buy cars for cash transport and other transactions. In term of the staffs, 175 out of 283 cadres (making up 62%) have reached intermediate or upward educational background, but their professional skills cannot totally meet job requirements yet. As a result, only seven of the funds are eligible to have accounting and transaction software supplied.

    Vice-Secretary of the provincial Party’s Committee claimed: “In spite of difficulties and shortcomings, the fund affiliates have an advantage that they close to the locals, so the loan is exactly offered those who are in need. I think they should reinforce this advantage. Nevertheless, as a significant role in the development of agriculture, farmers and rural areas, the fund should much invest in human resource development, infrastructure, and instruments for credit activities. Especially, they have to determine who their own clients are and specific target for their performance should be figured out.”

L.H (Reported by Thu Dung)