2. METODOLOGÍA
2.6. HERRAMIENTA DE RECOLECCIÓN DE DATOS
After the country‟s Reunification in 1975, the Vietnam economy was strictly regulated by the central planning model, which decelerated growth and created fewer incentives for economic agents to be involved in economic activities (Fan, Huong, & Long, 2004; McCarty, 2001).
Before the 1980s, the economy was characterised by: i) state or collective ownership; ii) the
centralisation of physical input and output supplies; iii) the absence of factor markets and
highly regulated markets of goods and services; iv) a concentration on heavy industries; and
v) a passive one-tier banking system in which the state bank performed as a commercial as
well as a Central Bank in order to allocate the capital to designated projects rather than to mobilise domestic savings (Fan et al., 2004). Consequently, the average national income growth rate per annum during the period 1976 – 1980 was estimated at 1.4%, far below the targeted rate of 13% to 14%. Severe food shortages, trade deficits, aid cuts and budget deficits, high inflation and a declining per capita income imposed high pressure on policy makers in the early 1980s (Pham, 2009; Vo, 1987).
Faced with severe inflation and a budget deficit in 1986, the Vietnamese government
reformed a number of macro policies, starting with decentralisation of SOEs, to control fiscal and monetary policies. The economic reform had a significant impact on the economy, particularly controlling inflation in the late 1980s. Within 10 years, the near hyperinflation in
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1986 was reduced to a single-digit level, facilitating economic growth (Pham, 2009). In 1990, that financial reform started with separating the State Bank monopoly into the two-tier
banking system with the State Bank functioning as a typical Central Bank and the commercial banks specialising in providing banking services. The newly established banking system opened the door for lending to the private sector. Currently, the commercial banking system consists of the state-owned banks and joint-stock banks, credit funds, joint-venture banks and foreign banks. Interest liberalisation, flexible management of the exchange rate and the application of indirect monetary measures in market management have also been implemented. The implementation of innovative monetary policies has contributed significantly to macroeconomic stabilisation, inflation control and an increasing supply of credit to all sectors of the economy. Table 2.2 summarises some key policies and events that particularly influenced the rural credit market in Vietnam.
Table 2.2 Key Policies and Events Influencing the Vietnam Rural Finance
Year Policy/Event Solution
1988 VietnamBank for Agriculture was established
To provide financial services to agriculture and rural sectors
1993 People‟s Credit Funds (PCFs) were re-established
To mobilised savings from rural households
1995 VietnamBank for the Poor was established
To provide credit to poor households at favourable interest rate
2001 Decree No.48/ND-CP/2001 of the Government to PCFs
To improve PCFs‟ organization and operations 2002 The Bank for Social Policies
(VBSP) was established
To provide cheap credit to the poor and rural households
2005 Decree No.28/ND-CP/2005 of the Government
To direct the organization and operations of microfinance institutions (MFIs)
2008 Resolution 26-NQ/TW/2008 on “Tam nong” of the Party Congress
To continue to provide favourable credit to the rural sector, and encourage the MFIs to lend to the rural sector
2009 National Microfinance Steering Committee was formed
To develop a market-based microfinance sector
2009 Decision No.497/QD-TTg/2009 of the Prime Minister
To provide the interest support for farmers within the Demand Stimulus package
4/2010 Decree 41/ND-CP/2010 on Credit Policy for developing agriculture and rural sector
To increase non-collateral loans for farming households, non-farm households, farming cooperatives, farming enterprises
6/2010 The New Law on Credit Institutions (CIL) was amended to replace the CIL in 1997
To incorporate non-bank MFIs into the formal financial system and to liberalise the banking operations including rural finance
Source: adapted from Le (2011)
Despite a number of limitations, the rural credit market‟s development has significantly contributed to the rural development of Vietnam in terms of the expansion of outreach and
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increasing credit access (Le, 2011; McCarty, 2001). The establishment of VBRAD in 1988 and the PCF in 1993 played a major role in supplying rural credit. They built a countrywide network for the specialised rural credit provider to expand its services. In 1995, the VBP was established under the control of VBRAD with the purpose of providing poor households with favourable credit, i.e., the poor could borrow collateral-free low interest loans. The
establishment of VBSP in 2003 further expanded social policy lending to the target group to ensure the inclusion of the poor as well as further establishing the microfinance sector in the rural credit market.
Government policies have deliberately encouraged the microfinance sector‟s development. Several policy initiatives are implemented to ensure microfinance institutions‟ operations to work in the rural financial market as well as to include the microfinance sector in the rural development process. Particularly, Decree No. 28/ND-CP/2005 provided the primary legal framework to open up the MFIs‟ operations to service clients. Resolution 26/NQ-TW/2008 re-emphasised rural development based on three main actors – agriculture, farmers and the rural sector. The policy indicated a further need to continue providing favourable credit to the rural sector by encouraging financial institutions to lend to the rural sector. In 2009, the National Microfinance Steering Committee was formed to develop a market-based
microfinance sector. Subsequently, two rural credit policies have been implemented. Decision No.497/QD-TTg/2009 of the Prime Minister aims to provide interest support for farmers within a demand stimulus package and Decree 41/ND-CP/2010 on Credit Policy for agriculture and rural sector development increases non-collateral loans for farming
households, non-farm households, farming cooperatives and farming enterprises. In particular, non-collateral loans increased up to 50 million VND for farming households, 200 million VND for non-farm households and 200 million VND for agricultural cooperatives and farming enterprises.
Although the MFIs have been formally directed by Decree No. 28, the Law on Credit Institutions amended in 2010 has legislatively integrated the MFIs as a subset of the formal financial system. As the landmark legislation for MFIs to operate in the rural financial market has been established, on-going efforts to formulate the Microfinance Strategy are major tasks. Le (2011) indicated the paradox of defining the Microfinance Strategy that ensures the MFIs performance meets the social objectives while pursuing market-oriented rural finance. On one hand, the maximising profit behaviour of the banks could drive the vast majority of poor and
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low-income households away from accessing a wider range of financial services, not just microcredit. In addition, the dominance of the subsidy from VBSP burdens the government budget and discourages the development of market-oriented rural MFIs.