LITERATURE REVIEW
Overview of Bank in the market economy
The rise and evolution of banks are closely linked to the growth of the commodity economy, establishing them as crucial economic and financial institutions Various types of banks have emerged, reflecting the overall development of the economy and the specific dynamics of the financial system.
A bank is defined as a financial institution that accepts deposits and safeguards money owned by individuals and organizations, subsequently lending these funds for economic activities, including profit generation and operational expenses According to Thomas P Fitch in his Dictionary of Banking Terms (2012), a bank is typically licensed to receive deposits, issue loans, process checks, and offer related services to the public This definition emphasizes the essential services that banks provide, which remain the core functions of modern banking institutions.
In Vietnam, Article 4 of Law No 47/2010/QH12 defines banks as a type of credit institution authorized to conduct various banking activities Banks are categorized into commercial banks, policy banks, and cooperative banks based on their operational nature and objectives Their core operations encompass essential services such as deposit facilities, credit extension, and payment processing.
A bank is a financial institution that provides a wide range of services, including credit, savings, and payment solutions, while fulfilling various financial functions that distinguish it from other business organizations in the economy.
Current types of banks in Vietnam
Banks can be categorized into different types based on their operational needs This article focuses on the classifications outlined in the Law on Credit Institutions, which provides a clear definition of these various bank types.
Commercial banks have evolved alongside the growth of the commodity economy, playing a crucial role in enhancing the market economy Their significant expansion positively influences economic development, as well as cultural and social progress.
Commercial banks, as defined by the Law on Credit Institutions, are financial entities authorized to engage in a wide range of banking activities, including currency trading and essential banking services like accepting deposits They utilize these deposits to extend credit, offer payment solutions, and conduct other profit-driven business operations, all in compliance with the Law on Credit Institutions and relevant legal regulations, as outlined in Decree No 59/2009/ND-CP from the Government regarding the organization and functioning of commercial banks.
Investment banks operate with medium and long-term investment objectives, also for the general development purposes but through indirect investment in valuable papers.
Banks focus on mobilizing medium and long-term capital for development The activities mainly focus on direct investments in projects.
A cooperative bank is a financial institution formed by the collective contributions of individuals and legal entities, aimed at promoting systematic integration, providing financial support, and regulating capital within the network of people's credit funds, as established by relevant laws.
A policy bank is a state-owned financial institution that operates not for profit but to serve customers in alignment with the government's priority policies Its capital primarily originates from the state budget, as well as from capital mobilization, bond issuance, and attracting both term and demand deposits Additionally, funding may come from government projects or loans from non-governmental organizations in other countries.
Bank Operations
Banking operations encompass a range of activities, including receiving deposits, extending credit, and processing payments They also involve investment planning, trust services, brokerage, guarantees, savings, cash management, and insurance However, this article will focus specifically on credit activities within the banking sector.
1.3.1 Credit and the role of credit for the poor and beneficiaries of social welfare 1.3.1.1 Concept and Characteristics of bank credit
Credit refers to the temporary transfer of resources from one party to another, with the expectation that the recipient will return a greater value after a specified period It has evolved alongside the production of goods Specifically, bank credit involves a transaction where a bank provides money or assets to a borrower, who must repay the principal and interest as agreed According to the Law on Credit Institutions No 47/2010/QH12, credit extension encompasses various agreements that allow individuals and organizations to access funds through lending, discounting, financial leasing, factoring, bank guarantees, and other credit operations.
Credit originated with the division of labor and the emergence of social classes, initially manifesting as usury practiced by the wealthy against the poor As the commodity economy evolved, disparities in capital availability emerged, with some individuals temporarily holding excess funds while others faced shortages The challenge of connecting these parties due to time and space constraints led to the establishment of banks, which serve as intermediaries by collecting surplus capital and providing loans to those in need.
Credit involves the transfer of resources from a lender to a borrower, allowing the borrower to use the resources without transferring ownership This fundamental aspect underpins other characteristics of credit A specified credit period is established, during which the borrower must complete their obligations and return both the principal and interest to the lender The borrower is required to repay an amount greater than the original loan, reflecting the interest charged, which distinguishes credit from other commodities Trust is essential in the credit relationship, as the lender must have confidence in the borrower's ability and willingness to repay the debt Additionally, bank credit is inherently risky, influenced by factors such as borrower defaults, fraud, legal issues, and external risks like natural disasters and market volatility, all of which can jeopardize repayment.
1.3.1.2 The role of credit for the poor and beneficiaries of social welfare:
Regardless of a country's development status or economic strength, poverty and hardship persist among its population To address the wealth gap and promote social stability, nations strive to implement effective solutions In Vietnam, the government has established a framework for providing credit to the poor and social welfare beneficiaries through Decree No 78/2002/ND-CP, issued on October 4, 2002 This decree emphasizes the mobilization of state financial resources to offer preferential loans aimed at enhancing production, creating jobs, and improving the quality of life for the underprivileged, thereby supporting national efforts in hunger eradication and poverty reduction.
Poverty is primarily driven by a lack of capital and business knowledge, which are essential for economic growth Without adequate financial resources and the skills to innovate, many individuals remain trapped in a cycle of poverty Limited access to education further exacerbates this issue, preventing them from acquiring the knowledge necessary to improve their circumstances As a result, the struggle against poverty persists for those who are unable to invest in their future.
Bank credit is essential for societal progress, particularly in helping the poor escape poverty by providing necessary capital for agricultural restoration and livestock raising It reduces reliance on usury, improving economic performance and preventing exploitation Additionally, bank credit enhances educational opportunities, enabling the poor to engage more effectively in the market economy through programs aimed at hunger eradication and poverty alleviation By encouraging careful planning in crop and livestock selection, it fosters innovation and proactivity in business activities Furthermore, bank credit plays a crucial role in transforming agricultural and rural economic structures by facilitating the adoption of new technologies and high-yield varieties, ultimately redistributing labor and creating new job opportunities It also mitigates social issues related to unemployment and promotes community bonds through shared knowledge in production techniques and financial management.
Economic development has significantly transformed rural life, enhancing political security, social order, and safety These improvements have mitigated negative societal issues, leading to a positive transformation of the countryside.
The Vietnam Bank for Social Policies (VBSP)
Resolution No 05-NQ/HNTW, established on June 10, 1993, during the 5th Conference of the 7th Party Central Committee, emphasizes the importance of enhancing rural socio-economic development The Party supports credit programs aimed at assisting poor households, social welfare recipients, and communities in economically disadvantaged regions, including ethnic minorities and highland areas Additionally, the resolution promotes various forms of unsecured loans specifically designed to aid impoverished households.
To effectively implement the Law on Credit Institutions and support credit policies for the poor and social welfare beneficiaries, the Vietnamese government has taken significant steps following the resolutions of the 9th National Congress and the 6th session of the 9th National Assembly This includes the establishment of the Vietnam Bank for Social Policies (VBSP) through Decree No 78/2002/ND-CP, which separates preferential credit from commercial credit Additionally, the government is fulfilling its commitments with the World Bank (WB) and the International Monetary Fund (IMF) regarding the Policy Bank's establishment The Prime Minister's Decision No 131/2002/QD-TTg formalized the restructuring of the Bank for the Poor, which is now distinct from the Vietnam Bank for Agriculture and Rural Development.
VBSP was created to provide preferential credit to the poor and social welfare beneficiaries, operating as a non-profit entity backed by the State for financial stability With a compulsory reserve ratio of 0% and no requirement for deposit insurance participation, VBSP also enjoys tax exemptions and is not obligated to contribute to the State Budget.
VBSP is authorized to engage in capital mobilization, lending, and payment operations, as well as managing budgets and accepting trust funds for preferential loans These funds can come from local governments, socio-political organizations, non-governmental organizations, and both domestic and international investors focused on economic development projects.
VBSP offers preferential credit to low-income, near-poor households, and social welfare beneficiaries, enabling them to enhance production, create jobs, and improve their income and living conditions This support aids in poverty alleviation and aligns with economic development initiatives aimed at eradicating hunger and ensuring social security The ultimate goal is to foster a prosperous population and a strong, democratic, and equitable society.
Under Decree No 78/2002/ND-CP, preferential credit loans from VBSP are available for specific groups, including poor households, students from low-income backgrounds enrolled in universities, colleges, and vocational schools, as well as individuals seeking capital to create jobs in line with Resolution 120/HDBT.
The Government's regulations, established on November 11, 1992, identify various beneficiaries eligible for capital from the Vietnam Bank for Social Policies (VBSP), including social welfare recipients working abroad temporarily, economic organizations, and households on islands, as well as those in mountainous areas facing socio-economic challenges under Program 135 To qualify for loans, individuals must be listed as poor households by the Commune-level People's Committees based on poverty standards set by the Ministry of Labor, Invalids, and Social Affairs The assessment of customers' backgrounds is conducted by savings and loan groups, which then compile a certified list with the commune-level People's Committee Currently, VBSP offers 23 loan programs, reflecting its commitment to expanding lending opportunities for various beneficiaries.
1.4.2 Some countries with banks operating in accordance with a typical form like Vietnam Bank for Social Policies
Poverty remains a global issue, and the presence of banks for social policies varies by country, influenced by social conditions and the political and legal frameworks in place In addition to Vietnam, several countries have established banks that serve specific purposes to address these challenges.
Grameen Bank in Bangladesh, founded by Professor Muhammad Yunus, exemplifies a successful village banking model aimed at empowering the poor, particularly women in rural and challenging areas The bank's capital is primarily sourced from its low-income customers (94%) and supplemented by state funds (6%) Yunus initiated this project by providing small loans, such as $27 to 43 households, to enable them to start small businesses without requiring collateral, as he believes that the poor possess the potential to work but lack access to capital The trust-based lending approach fosters a unique system where borrowers form "solidarity groups" of five individuals with similar backgrounds, promoting shared business experiences and mutual accountability This model not only enhances creativity and self-sufficiency in household production, such as farming and livestock management, but also improves financial literacy and savings management, ensuring timely loan repayments.
Bank Rakyat Indonesia (BRI), established in 1895 and nationalized in 1950, has evolved significantly over the decades In the 1970s, BRI launched 3,600 village banks to support agricultural development and government loan programs By 1984, the bank restructured to embrace microfinance, adhering to market principles with sustainable interest rates In 2003, BRI became the largest microfinance bank in Indonesia, establishing a comprehensive nationwide network The bank prioritizes savings, offering flexible withdrawal options and ensuring positive real interest rates BRI implements policies to encourage savings among borrowers, particularly low-income individuals, while rewarding timely loan repayments Although BRI does not directly serve the poorest customers, its affiliates engage in government initiatives to support farmers and fishermen Loan collateral requirements are adaptable, and repayment terms are tailored to customer agreements, enhancing accessibility and reducing financial risks.
Credit quality
There are various definitions of "Quality", for example: Quality is the level of conformity of a product to consumer requirements.
"Quality is Conformity to Requirements" (6)
"Good quality means a predictable degree of uniformity and dependability with a quality standard suited to the customer" (7).
The quality of bank credit must satisfy the needs of customers and stakeholders, including society and financial institutions For customers, credit quality is evident when their borrowing purposes are fulfilled, with reasonable terms, interest rates, and repayment periods, alongside simple and clear procedures that comply with legal and credit standards Although policy banks do not prioritize profit like commercial banks, maintaining high credit quality remains paramount to ensure timely repayment of capital and minimize overdue and bad debts Furthermore, high credit quality plays a crucial role in socio-economic development by facilitating production, enhancing goods circulation, improving living standards, addressing unemployment, and advancing industrialization and modernization.
Credit quality refers to the comprehensive set of features and characteristics of a product or service that determine its ability to meet customers' reasonable loan needs This includes adherence to credit policies, ensuring safety, and promoting economic efficiency for the bank, while also contributing to the broader socio-economic landscape In the banking sector, credit quality serves as a metric for assessing the risk level associated with a credit institution's loan portfolio, commonly referred to as loan quality.
1.5.2 Criteria for assessing credit quality
To assess the credit quality, two groups of criteria are considered: qualitative indicator and quantitative indicator.
On the customer side, qualitative indicators are based on the timely response to customer needs, customer service satisfaction, and the timeliness of credit offers from the Bank.
Banks adhere to legal standards and State Bank regulations, along with established credit extension processes and periodic credit policies However, customers often base their assessment of credit quality more on personal perceptions and experiences rather than these official criteria, highlighting the significant role of the Bank's credit officers in shaping customer trust.
The evaluation of credit quality becomes more credible when utilizing specific indicators such as the overdue debt ratio, the number of households living in poverty, and the total number of households that have successfully risen above the poverty line Initially, we will focus on the overdue debt ratio as a key metric.
DEBT ratio (%) = Overdue debts / total debit balance
Overdue debt refers to the inability of borrowers, whether individuals or corporations, to repay both principal and interest by the due date specified in their credit contracts Borrowers categorized as having overdue debts by the Vietnam National Credit Information Center (CIC) face challenges in securing loans from banks and credit institutions A high overdue debt ratio indicates the mismanagement of loans, leading to uncollectible debts and adversely affecting banks' capital, while also limiting access to loans for financially disadvantaged households This ratio serves as a crucial indicator of capital utilization and borrowers' repayment capabilities, with a lower overdue debt ratio signifying improved credit quality and better access to capital for the poor The credit relationship hinges on the effective "borrowing and repaying" dynamic between customers and banks; thus, maximizing the recovery of principal and interest is essential for enhancing credit quality However, instances have arisen where borrowers misallocate funds from state-owned commercial banks (SOCB), using them for personal purposes instead of intended agricultural investments, thereby questioning the efficiency of capital use despite the bank's ability to recover funds This situation suggests the need for additional criteria to evaluate credit quality effectively.
The second indicator of poverty is the number of households that have risen above the poverty line A household is considered to have escaped poverty when its per capita income exceeds the current poverty threshold, resulting in its removal from the list of impoverished households These households now possess the capacity to thrive and enhance their quality of life.
And the last indicator in the list is the total number of poor households who have escaped from the poverty line This is calculated by:
To calculate the change in the number of poor households over a specific period, subtract the number of poor households at the end of the period from those at the beginning Then, add the number of poor households that migrated during that time and include any newly listed poor households This formula provides a comprehensive view of the dynamics affecting poverty levels within the community.
The credit activities of VBSP play a significant role in poverty reduction by providing production capital to help impoverished households escape poverty, reduce unemployment, and promote social stability The annual increase in the number of poor households that have risen above the poverty line highlights the effectiveness of these credit initiatives.
The characteristics of policy credit differ significantly from commercial credit, as commercial banks have the discretion to select their customers, whereas the Vietnam Bank for Social Policies (VBSP) is obligated to provide support to beneficiaries of social welfare This necessitates that VBSP actively seeks out customers for its lending services, ensuring that no specific area or demographic is overlooked To enhance lending and guarantee access to State incentives for all eligible individuals, it is crucial to monitor key criteria, including the cumulative number of poor households receiving loans, the proportion of those households compared to the surveyed list, and the operational efficiency of the Saving and Loan Office (S&LO).
The total number of low-income households eligible for credit loans reflects the cumulative count of poor households that can apply for financial assistance This eligibility is determined by measuring the accumulated number of home borrowers throughout the reporting period, providing a clear standard for assessing access to credit among low-income families nationwide.
The total number of poor households = the accumulated number of borrowers of the previous period + the accrued number of borrowers of the reporting period.
The eligibility of poor households for loans is assessed based on a specific criterion, which measures the quantity of credit operations This is calculated by determining the ratio of total low-income families eligible for loans to the overall number of poor households, as defined by established standards.
The percentage of poor households eligible for loans = the total of poor families eligible for loans per the total enlisted poor households.
And the final criterion is the work efficiency of the Savings and Loan Office (S&LO).
The Savings and Loans Office acts as an extension of the Bank for Social Policies (BSP), playing a crucial role in the loan process It collaborates with social and mass organizations to screen and select borrowers, ensuring that loans are used effectively and for their intended purposes Additionally, the office monitors borrowers to encourage timely repayments of loans and interest Consequently, the efficiency of these partnerships significantly impacts the credit quality of the BSP.
Factors influencing the operation efficiency
Credit operations for economically disadvantaged households involve significant risks due to various factors In addition to natural disasters like floods and agricultural plagues that can cause widespread destruction, challenges also arise from a lack of business knowledge, unmarketable products, and poor competitiveness Ultimately, three key factors significantly impact the efficiency of these operations.
The cumulative borrowing frequency among poor households reflects the total number of these households that have utilized credit capital across the country This metric serves as a key indicator of access to loans, accumulating data from the initial borrowing household through to the conclusion of the reporting period.
The second factor is the total number of poor households that got loans, which is calculated by:
The cumulative number of households that got loans by the end of the previous period + accumulation of number of households that have been borrowed in the reporting period.
The third factor is the proportion of poor households that have access to loans
The quantitative assessment criteria for credit work are defined as the ratio of poor households eligible for loans to the total number of poor households, based on established standards.
Proportion of poor households that have received loans = total number of poor households that have received loans / total number of poor households listed.
The quality of Savings and Loan Groups significantly influences the operational efficiency of VBSP, as these groups act as an extension of its services They handle crucial tasks in the lending process, including reviewing and selecting borrowers, monitoring the proper use of loan capital, and ensuring timely repayment of interest and principal Consequently, the effectiveness of the trust and authorization activities carried out by these partners directly impacts the overall credit quality of VBSP.
THE STUDY
Vietnam Bank for Social Policies (VBSP) operational situation in Quang
2.1.1 Vietnam Bank for Social Policies' organizational structure and operating operation network in Quang Ninh province
The Vietnam Bank for Social Policies branch in Quang Ninh province was established on January 14, 2003, under Decision No 42/QD - Management Board This provincial branch operates under the oversight of a Provincial Management Board, led by the Vice Chairman of the Provincial People's Committee, and includes directors and deputy directors from various departments such as the State Bank - Quang Ninh branch, Department of Finance, and Department of Labor, War Invalids and Social Affairs Additionally, the board comprises representatives from local organizations like the Women's Union, Farmers' Union, and Veterans Association, as well as 13 district-level representatives corresponding to the bank's transaction offices across the province.
The Board of Representatives of the Vietnam Bank for Social Policies (VBSP) at the district level is chaired by the Chairman or Vice Chairman of the People's Committee, with the Director of the VBSP Transaction Office serving as a permanent member The composition and number of additional members are determined by the district-level People's Committee based on local needs All representatives at various levels serve on a part-time basis and receive compensation from VBSP, except for the permanent member, who is a full-time employee and is paid according to the state salary scale.
The Management Board of the Vietnam Bank for Social Policies oversees the execution of its resolutions and disseminates guiding documents across local levels To enhance the effectiveness of concessional capital, it is essential to align policy credit with community poverty reduction initiatives and socio-economic development projects.
The VBSP branch in Quang Ninh province consists of one provincial branch located in Ha Long city and 12 district transaction offices, reduced by one due to the merger of Hoanh Bo district into Ha Long city in 2020 Consequently, the Vietnam Bank for Social Policies transaction office in Hoanh Bo district was dissolved The Provincial Branch operates under the direct authority of the Head Office, acting as a legal entity empowered by the General Director to oversee and manage the activities of the Vietnam Bank for Social Policies in Quang Ninh Province.
Managing VBSP branch in Quang Ninh province is the branch manager, with Deputy Directors and Heads of Professional Departments assisting the director.
VBSP branch in Quang Ninh province has five specialized departments:Planning - Credit Operations, Accounting - Budgeting, OrganizationalAdministration, Internal Control, and Informatics.
The branch employs a total of 169 individuals, with 141 professional workers making up 83.4% of the workforce In addition, there are 28 security guards and janitors, representing 16.6% of the staff Notably, female employees comprise 48.5% of the total workforce, with 82 women contributing to the branch's labor diversity, as highlighted in the 2020 Report on Trade Union Activities.
The staff composition includes 12 individuals with master's degrees, representing 7% of the workforce, while 126 university and college students make up a significant 74.1% Additionally, there are 4 employees with intermediate degrees, accounting for 2.3% of the total staff.
According to the 2020 Report on Trade Union Activities, 28 individuals with vocational degrees are employed as security guards, janitors, and in other professions, representing 16.5 percent of the total workforce comprising officials, party members, and employees.
As of December 31, 2020, the Vietnam Bank for Social Policies in Quang Ninh province managed a total capital of 3,352.6 billion dongs, with 70% of this capital sourced from the party central committee This primarily balanced loan capital is supplemented by various mobilized funds, including interest-subsidized sources and trust funds transferred from the local budget, as highlighted in the 2020 operational report of the management board.
Other sources account for a very small portion of Vietnam Bank for Social Policies Quang Ninh's total loan capital.
The branch is currently offering 19 credit programs, amounting to a total credit balance of 3,272.3 billion dongs, with 25,607 customers applying for these credits This initiative is part of the report on lending for poor households and beneficiaries of social policies.
This is the only bank with local branches operatingoperating at commune/village level., Hhowever, the operation model is quite simple with only 169 official staffs
With the increasing workload, while facing many difficulties in operation, the
The Vietnam Bank for Social Policies (VBSP) has implemented fiduciary policies in its credit processes with various political and social organizations, ensuring transparency in savings and lending groups Quarterly, VBSP compensates these organizations with fiduciary fees calculated from the interest collected, credit interest rates, and the ratio of overdue balances to credit balances Additionally, monthly commissions are paid to the savings and lending groups, based on the interest collected and credit interest rates.
Savings and credit groups consist of low-income households and social welfare beneficiaries from the same community These groups are established by socio-political organizations and receive approval from local authorities Their operations are grounded in voluntary participation and mutual support, focusing on responsible lending and timely repayment of debts and interest.
Savings and credit groups play a crucial role in evaluating eligible customers for preferential interest rates, ensuring adherence to guidelines and oversight from local commune or village leaders, socio-political organizations, and the People's Committee Once the list of qualified customers is approved, bank staff disburses loans directly to households at various transaction points.
The VBSP has successfully expanded its services to every village, population group, commune, and ward within the Province, ensuring universal access to their lending funds Thousands of staff from organizations such as the Farmers’ Union, Women’s Union, Veteran Association, and Youth Union are actively engaged in providing fiduciary services for VBSP These socio-political organizations play a crucial role in forming and supervising Savings and Credit groups, guiding customers in accessing loans, and collaborating with VBSP to collect outstanding debts, serving as invaluable support despite being considered non-professional staff.
VBSP offers a variety of small and individual loans primarily targeted at customers from impoverished households and social welfare beneficiaries, predominantly residing in rural and mountainous regions with limited transportation access To enhance accessibility to its credit funds and reduce travel expenses for these individuals, VBSP has established numerous mobile transaction points located at the offices of Commune People’s Committees Currently, the bank operates a total of 172 commune transaction points to better serve its clientele.
In 177 wards, villages, and communes, the State's policies regarding preferential credit loans are transparently displayed at the Commune People's Committee Office and various transaction points This includes essential information about the requirements set by VBSP, as well as updates on loan availability and customer payment statuses.
Current situation of preferential credit to the poor and to the beneficiary of
of social welfare at VBSP branch in Quang Ninh province
2.2.1 Delivering targets on credit fund s targets
The primary operating fund of the VBSP branch in Quang Ninh province is sourced from the State Budget, investment trust funds, and contributions from organizations and individuals in the market, as well as savings collected from the community through Savings and Credit groups.
Table 1: Summary of credit funds for the period 2018-2020
Unit: billion dongs F und structur
Increases (+), and decreases (-) compared to 2018
Increases (+), and decreases (-) compared to 20198 Total fund
Funds raised with interest covered from the budget
Investment trust funds taken from the local budget
(Source: Balance report credit funds of VBSP, Quang Ninh Province from
To obtain the funds needed for the credit programs and to servefor the
Government’s objectives in the area, credit fund has grown 9.16% over the last
In 2018, the total credit fund was 2,.813.,4 billion dongs
In 2019, the total credit fund was 3,.100.,64 billion dongs, grew 10.2% compared to 2018
In 2020, the total credit fund was 3,.352.,6 billion dongs, grew 8.13% compared to 2019 and 119.17% compared to 2018 (3,.352.,6/2,.8113.,4)
Increasing funds mainly come from VBSP, with 2,,346 billion dongs, accounting for 70% total operation funds, grew 249.,5 billion dongs compared to 2018 and 77.1 billion dongs compared to 2019
Public funds raised with interest covered from the budget was 638.,4 billion dongs, accounting for 19% of the total fund, grew 94,2 billion dongs compared to 2018 and 62,94 billion dongs compared to 2019
Local funds transferred to VBSP was 368,12 billion dongs, accounting for 10,98% the total fund
The fund structure has shifted towards a reduction in state budget allocations, while there is a notable increase in public funds supported by the budget and investment trust funds at the local level The VSBP branch in Quang Ninh province has made significant efforts to enhance local funding, which is essential for providing credit to poor households and beneficiaries of social policies.
In 2020, the Provincial Party Committee and the People’s Committee allocated an additional 60 billion dongs from local funds to the Vietnam Bank for Social Policies (VBSP), enhancing its ability to support laborers impacted by Covid-19 This funding aims to create jobs, sustain production and business operations, and provide financial loans for the recovery of the pig industry following the African swine fever outbreak Overall, the local budget saw an increase of 111.84 billion dongs during this period.
2019 and grew 195,68 billion dongs compared to 2018 This all has shown the care and attention from the local authorities to the credit policy activities and social welfare
2.2.2 Implementing credit programs, serving the economic and socialsocial and economic development objectives of the Province
When it was founded, VBSP held principle responsibilities of providing credits and loans to help people escape from poverty and creating more jobs.
VBSP's preferential credit programs continue to play a vital role in mobilizing financial resources from the government, aid organizations, and various projects to support the poor and beneficiaries of social policies These initiatives not only foster production and business activities but also create jobs and enhance living standards, particularly in rural and remote areas Key efforts include providing loans for safe water and sanitation, housing repairs, electricity access, human resource development, student credit loans, and support for small and medium enterprises during the Covid pandemic Ultimately, these programs contribute significantly to the government's goals of poverty alleviation and rural development.
The VBSP Quang Ninh branch initially managed two key lending programs aimed at fostering economic growth in disadvantaged areas These programs included a household economic development initiative funded by Agribank and a job creation lending program supported by the State Budget As of now, the total outstanding debt stands at 144.069 million dongs, with overdue and bad debts amounting to 7.392 million dongs, representing 5.2% of the total debt.
Up to 31/12/2020, VBSP branch in Quang Ninh has implemented 19 credit programs, including (1) Preferential lending to poor households under Decree
The government has implemented various lending programs to support vulnerable communities, including: lending to near-poor households (Decision No 15/201), newly escaped from poverty households (Decision No 28/2015), and students (Decision No 157/2007) Additional initiatives focus on safe water and rural sanitation (Decision No 62/2004), job creation (Decree No 61/2015), and support for employees working overseas (Decision No 365/2004) Furthermore, there are programs for traders in difficult areas (Decision No 92/2009), business households in difficulty-stricken regions (Decision No 31/2007), and social housing loans (Decree No 100/2015).
(11) Lending to specially disadvantaged ethnic minorities - Decision No. 54/2012, (12) Lending to poor, difficult ethnic minority households - Decision
No 755/2013, (13) Lending for afforestation and breeding development – Decree No 75/2015, (14) Small and Medium Enterprises loan program (KFW),
(15) Lending to poor ethnic minority households under Decision No 2085/2016,
The article discusses various loan support initiatives aimed at fostering development within cooperatives and assisting vulnerable groups Key programs include house loans for low-income households as outlined in Decision No 33/TTg, financial assistance for employers to cover work suspension wages due to the Covid-19 pandemic, and lending opportunities for handicapped workers under the NIPON project These efforts aim to promote economic stability and support marginalized communities during challenging times.
The results are as follow:
Table 2: Lending results from the credit programs for the period (2018 - 2020)
1 Preferential lending to poor households -
2 Lending to near poor households – Decree
3 Lending to newly escaped from poverty households – Decree No 28/2015 478,099.07 580,390.29 606,436.54
5 Lending for Safe WaterClean water and
6 Job creation lending program – Decree
Lending to employees who work overseas for a limited time - Decree No.
Lending to business households in difficulty-stricken areas- Decree No.
9 Lending to traders in difficult areas -
10 Social housing loan program - Decree
11 Housing loan for poor households -
12 Housing loan for poor households-
13 Lending to poor ethnic minority 1,614.70 221.00 32.00 households - Decree No 2085/2016
Lending to poor, difficult ethnic minority households - Decree No.
15 Lending for afforestation and breeding development - Decree No 75/2015 4,865.00 4,865.00 4,420.00
16 Small and Medium Enterprises loan program 6,929.21 2.895.60 2,590.42
18 Lending to handicapped workers under
Lending to employers for paying work suspension wages for employees due to the impacts of Covid-19 pandemic
(Sources: Balance report from the VBSP branch on Quang Ninh Province for the year 2018-2020 (10))
Total outstanding loans as of December 31, 2020 were VND 3,272.67 billion dongs, an increase of 1.2 times compared to 2018, 44.03 times compared to 2003.
In 2020, the overdue debt in Quang Ninh decreased to 2.78 billion dongs, representing only 0.085% of the total outstanding loans, according to the VBSP balance report This marks a reduction of 690 million dongs from 2019, when the overdue debt was 3.47 billion dongs.
In 2020, the number of loan programs increased by one compared to two years prior, reflecting the growing need for financial support amid the significant challenges posed by the Covid-19 pandemic This crisis has profoundly impacted the lives and business activities of many individuals in the province, particularly the poor and social welfare beneficiaries In response, the inter-sectoral collaboration between the Department of Labor, War Invalids and Social Affairs, the Department of Finance, and the VBSP branch aimed to advise the Director of the Board of Representatives on supplementing local capital for production and business initiatives to assist workers affected by the pandemic and the African swine fever outbreak.
This study prioritizes the analysis of urgent new programs in response to the province's socio-economic conditions, given the time constraints As of December 31, 2020, the growth in outstanding loans was primarily concentrated in specific sectors.
Lending for job creation, which increased by 477.95 billion dongs compared to 2018.
Lending for Social housing, which increased by 128.34 billion dongs compared to 2018
Lending for Safe WaterClean water and Rural Sanitation, which increased by VND 148.88 billion dongs compared to 2018.
In 2020, the government implemented a program to provide loans to employers for covering work suspension wages due to the COVID-19 pandemic, as outlined in Decision No 15/2020/TTg, with a total debt balance of 783.11 billion dongs.
The goal is to create new jobs with stable income for employees, solving redundant labor in the locality.
The National Employment Fund, along with mobilized capital from VBSP, facilitates loans aimed at job creation, maintenance, and expansion, in accordance with the Employment Law No 38/2013/QH13 and Decree No 61/2015/ND-CP To qualify for this lending program, employees and production or business establishments must meet specific criteria outlined in these regulations.
To qualify for loans, production and business establishments must operate legally and present feasible projects that align with local industries These projects should aim to create stable jobs and a secure working environment, with necessary approvals from relevant authorities Additionally, loan assets must comply with regulatory requirements Individuals seeking loans must possess full civil capacity, intend to create jobs for themselves and others, and have the endorsement of the competent agency in the project area Furthermore, applicants must legally reside in the locality where the project is being executed.
In 2 2003, VBSP Quang Ninh branch received loans and created jobs from the State Treasury for management, with a total outstanding balance of VND 38.81 billion dongs; annual supplement is very low by the central bank for social policy (from 3 to 5 billion dongs).
The VBSP Quang Ninh branch has collaborated effectively with the provincial Department of Labor, War Invalids, and Social Affairs to advise the Provincial People's Committee on enhancing the provincial budget This initiative aims to invest in various programs and projects that attract a significant workforce, thereby supporting the development of rural craft villages Key sectors benefiting from this support include ceramics in Dong Trieu, bamboo and rattan exports in Yen Hung, forest product processing in Hoang Bo, Dong vermicelli production in Binh Lieu, and aquaculture in Van Don, Hai Ha, and Mong Cai.
RECOMMENDATIONS
Recommendations to the State
VBSP STAFF HAVE TO TAKE CHARGE OF COMMUNE
TRANSACTIONS ON ALL WEEKENDS (SATURDAY, SUNDAY) FROM
THE 6TH TO THE 21ST OF EVERY MONTH.
PURSUANT TO ARTICLE 110 OF THE LABOR CODE 2012 STIPULATES
Employees are entitled to a minimum of 24 consecutive hours of rest each week In exceptional circumstances where weekly rest cannot be accommodated due to work cycles, employers are required to provide employees with an average of at least four days of leave per month.
2 THE EMPLOYER HAS THE RIGHT TO DECIDE TO ARRANGE THE WEEKLY REST ON SUNDAY OR ANOTHER FIXED DAY OF THE
WEEK, BUT IT MUST BE RECORDED IN THE LABOR
REGULATIONS.” HOWEVER, DUE TO THE NATURE OF THE JOB,VBSP STAFF CANNOT HAVE COMPENSATORY LEAVE BECAUSETHIS WILL CAUSE A SHORTAGE OF HUMAN RESOURCES.
The state should prioritize the well-being of VBSP staff by establishing clear regulations regarding overtime bonuses and travel allowances, ensuring that employees feel secure and valued in their roles.
The current equipment used for commune transactions, including laptops and cash counters, is outdated, leading to prolonged transaction times due to machine delays and errors Upgrading this machinery is crucial for enhancing work productivity and saving valuable time in an already challenging work environment.
3.2 TOFOR THE BOARD OF DIRECTORS, BOARD OF GENERAL
The deposit interest rates offered by policy banks are generally lower than those of state-owned commercial banks, which provide a variety of payment options and attractive incentives, making them more competitive in attracting customers for deposits Additionally, there is a significant demand for loans from beneficiaries of social welfare programs.
EXCEEDS THE CAPITAL MOBILIZED BY POLICY BANKS.
THEREFORE, IN ORDER TO ATTRACT CUSTOMERS TO DEPOSIT MONEY INTO POLICY BANKS, THEY MUST HAVE SUBSTANTIAL STEPS BY IMPROVING AND UPGRADE TECHNOLOGY ALONG WITH
In the 4.0 era, it is crucial for policy banks to adopt modern technology and enhance flexibility within their payment systems This approach will streamline the processes of depositing and withdrawing money, ultimately attracting more customers to invest in policy banks By increasing capital through these innovations, policy banks can better serve the overarching goal of ensuring that no one is left behind in the financial landscape.
VBSP BRANCHES NATIONWIDE NEED TO PROMOTE THE
Leveraging technology is essential for enhancing operational quality, boosting productivity, and minimizing costs To effectively improve capital preservation, it is crucial to collaborate closely with professional agencies that can offer guidance and technical assistance to borrowers.
Prime Minister Nguyen Xuan Phuc emphasized the urgent need to support those who are already impoverished and lacking business knowledge by providing credit and guidance on business and production activities He stated, "We cannot store the loan situation in a bamboo tube and leave it in the kitchen attic to later return it to the bank for social policies." This highlights the importance of the Bank for Social Policies as a vital channel for implementing social security measures The Prime Minister urged the bank to continue effectively managing social policy credit to assist those in need.
CAPITAL; ENSURE PROMPT AND FAVORABLE LENDING TO THE RIGHT PERSONS AND FOR THE RIGHT PURPOSES, AND IMPLEMENT
STEPS IN A PUBLIC AND TRANSPARENT MANNER THE
PROCEDURES MUST BE SIMPLER AND MORE CONVENIENT,
3.3 TOFOR THE BOARD OF DIRECTORS OF VBSP IN QN PROVINCE BOARD OF DIRECTORS OF VBSP IN QUANG NINH PROVINCE CONSTANTLY SHOULD TRAIN, BUILD AND DEVELOP A TEAM OF GOOD PROFESSIONALS WHO ARE ATTENTIVE TO THE LIVES OF
To enhance communication with ethnic communities, the Board of Directors of VBSP should prioritize the recruitment of employees proficient in ethnic languages Additionally, investing in extra training for young staff will equip them with the skills needed to effectively listen to and understand the expectations of these communities.
PEOPLE IN THEIR BUSINESS TRIP TO REMOTE AREAS.
PHỤ LỤC+ TÀI LIỆU THAM KHẢO ĐÂU?
CHAPTER 3: RECOMMENDATIONS 3.1 Recommendations to the State
To foster sustainable growth in the agricultural sector, the State must implement policies that support the development of agricultural practices This includes designating the Ministry of Agriculture and Rural Affairs as the central coordinating body among various ministries to enhance agricultural, forestry, and fishery extension services Additionally, efforts should focus on promoting the consumption and processing of agricultural products, improving marketing strategies, offering production guidelines, and ensuring protection for exports.
Investment in infrastructure in rural areas needs to be focused to create development
The government must implement policies that foster the growth of the rural financial market, ensuring that financial companies have the legal framework to offer services to all individuals This includes promoting insurance credit options to mitigate potential risks faced by rural communities.
Recommendations to People's Committees at all levels
To effectively implement the Government's preferential credit policies at the local level, it is essential for People's Committees at all levels to collaborate in addressing the challenges faced by banks, unions, and savings and credit groups This coordination is particularly crucial for the recovery of bad debts and the settlement of outstanding debts, as these efforts align with the Party and State's commitment to supporting beneficiaries through these preferential policies.
Local People's Committees play a crucial role in assisting borrowers, particularly those from poor and extremely disadvantaged households, to utilize capital effectively Many of these borrowers lack essential business skills and technical knowledge, resulting in inefficient capital use and an inability to generate interest or save for loan repayment To address this issue, it is vital to enhance collaboration among local authorities, entrusted organizations, and agricultural, forestry, and fishery extension centers Regular training programs should be implemented, focusing not only on production techniques but also on management skills and effective use of bank loans.
Recommendations to the Board of Directors of VBSP
The Board of Directors should recommend that the Government and relevant ministries allocate sufficient capital at the start of the year, aligned with the annual growth plan This proactive approach will enable localities to effectively manage disbursement and debt collection, preventing scenarios where communities lack necessary funds despite their capital needs The distinction between impoverished households and those transitioning out of poverty is precarious, necessitating ongoing state support for families that have recently escaped poverty Therefore, the Board should advocate for these households to continue receiving preferential credit policies for an additional 3-5 years, ensuring they have the resources and conditions necessary for sustainable economic advancement This strategy will enhance the effectiveness of the State's preferential credit programs.
Finally, it is necessary to improve and develop a variety of payment methods to attract customers to deposit money at VPSB.
Recommendations to the Savings & Loans group
To enhance the effectiveness of the Management Board, it is essential to provide regular training alongside focused sessions on delegation Additionally, equipping board members with essential management knowledge and skills—such as record-keeping, conducting meetings, and effective communication with banks—will significantly improve their operational capabilities.
Enhancing the quality of loan reviews is essential for effectively implementing the Government's preferential credit policy and safeguarding capital resources Accurate loan assessments help prevent misallocation of funds, making it crucial for the Management Board of the Savings and Credit Group, along with entrusted associations and mass organizations, to prioritize improvements in this area.
Recommendations to the entrusted associations and mass organizations
Entrusted associations and mass organizations must diligently oversee the savings and credit groups they manage to ensure effective repayment of principal and collection of loan interest and savings.
Professional talent competitions organized by entrusted associations and mass organizations are crucial for enhancing member competencies and fostering enthusiasm in their work Additionally, classifying these associations and organizations is essential for promoting effective participation and development among their members.
Recommendations to VBSP Quang Ninh Branch
To enhance the quality and professionalism of bank staff, particularly credit officers, training sessions must focus on improving work ethics and professional capacity Credit officers should not only participate in training courses organized by the Training Center but also proactively arrange specialized training whenever new guidelines and policies are introduced It's essential to assess trainees' knowledge after each session, as these evaluations serve as a measure of training effectiveness The results of these tests can be used as criteria for performance evaluation and recognition, encouraging staff to enhance their skills and meet job requirements.
To enhance operational effectiveness, it is essential to strategically assign qualified staff, particularly credit officers, based on their skills and qualifications while adhering to State regulations This approach should consider the unique characteristics of the Vietnam Bank for Social Policies (VBSP) and its focus on remote and challenging environments Prioritizing the recruitment of individuals from ethnic minority groups and implementing incentives will help attract personnel to serve in underprivileged and difficult districts.
To enhance understanding of credit policies, the VBSP Quang Ninh Branch must collaborate closely with village governments and commission-receiving organizations It is essential that the chief of the savings and loan group effectively communicates borrowers' rights and obligations before, during, and after the loan process This approach aims to prevent a dependency mentality, promote responsible loan usage, encourage savings practices, and ensure timely loan repayments and regular interest payments.
Effective communication within an organization is essential, with leaders addressing their respective groups during meetings—chiefs in savings and loan gatherings, village chiefs in village meetings, and sub-quarter leaders in their meetings It is crucial to inform beneficiaries that the funds from the Vietnam Bank for Social Policies (VBSP) are loans that come with time constraints and must be repaid on schedule Before securing a loan from VBSP, beneficiaries should carefully evaluate their plans for utilizing the funds and possess the necessary management skills to ensure successful repayment.
The establishment of VBSP has significantly improved access to preferential loans for poor households and social welfare beneficiaries, particularly in remote and underdeveloped areas This initiative aims to help these communities escape poverty, reduce disparities in quality of life and social welfare, and bridge inter-regional gaps By providing marginalized groups with financing options for their businesses, VBSP is gradually eliminating reliance on outdated business practices and approval processes.
“black credit” The separation of non-commercial preferential financing from the usual commercial banking system is also innovative and in agreement with international standards
To effectively alleviate poverty, it is essential to implement proper policies and establish a dedicated bank for preferential financing, ensuring that state funds reach the poor safely and conveniently, akin to providing a "fishing rod" rather than just "fishes." However, achieving this effectiveness requires a collaborative effort involving the State, ministries, political-social organizations, benefactors, and the community, as the active participation of the poor themselves is a crucial element in the fight against poverty.
This essay presents key suggestions aimed at enhancing the effectiveness of financial support for the impoverished The success of these proposals relies on the collaborative efforts of the Vietnam Bank for Social Policies (VBSP) and coordinated actions among various government levels, sectors, and organizations involved in the initiative.
Due to the author's limited knowledge and time, certain weaknesses and limitations are unavoidable in this research The author welcomes constructive feedback from VBSP directors, professors, and other interested parties to enhance the study.
The author would like to thank the professors, directors and staff of VBSP QuangNinh branch for their kind support in helping the author complete this essay
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TC318_Bai1_v1.0014111206.pdf TC318_Bai1_v1.0014111206 [Accessed 1-3-2021].
9 Balance report credit funds of VBSP Quang Ninh Province from 2018- 2020
10.Balance report from the VBSP branch on Quang Ninh Province for the year 2018-2020.
11 The summary report of 2020 activities of VPSB Quang Ninh.
12 The report on activities of the Board of Directors of Quang Ninh province in 2020.
13 Anh Minh (21/12./2020), Vietnam Bank for Social Policies Awarded Labor
Hero, Economy, Baochinhphu.vn http://baochinhphu.vn/Doanh-nghiep/Ngan-hang-CSXH-nhan-danh-hieu- Anh-hung-lao-dong/417580.vgp
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