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Microfinance in Vietnam - A Survey of Schemes and Issues


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  • Adam McCarty

    (Institute of Social Studies, The Hague)

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    This report follows up on a 1996 UNDP survey of microfinance activity in Vietnam. The need was not simply because of the five-year time lapse, but also because the larger multilateral donors were showing interest in funding microfinance activity, and it was therefore a good time to survey the sector and identify strategic issues and "lessons learned" for their benefit. This report had highlighted a number of problems concerning microfinance in Vietnam. These concerns, however, should not cloud the general picture of substantial progress during the past decade. The move by the government to allocate significant funds for the rural banking system is the most notable achievement. The government has also been active in developing experiments with new forms of credit cooperatives, and it is now seeking to mobilise savings through post offices. The missing element is the lack of a clear legal status and a prudential regulatory framework to encourage development of the non-state sector to provide microfinance services. The lack of institutional support has frustrated the NGO community. The conditions of “social capital” in Vietnam are ripe for the rapid expansion of microfinance schemes along the lines of those in Indonesia and Bangladesh . But the NGO schemes have also constrained themselves. NGO activity in microfinance may be characterised as “variations around a theme”, that theme being an acquiescence to government interest rate policies and a subsequent neglect of savings mobilisation. There are exceptions, but they are few, and there are many more schemes that are just “door opening” subsidies for other project objectives. There is a need for some schemes to aggressively strive for financial sustainability based upon mobilising savings. The donor community in general has relatively neglected Microfinance. The multi-lateral and some bilateral donors are showing renewed interest, but only in recent years. There is great scope for expansion into Vietnam’s segmented and inefficient rural financial markets. A detailed understanding of these markets, and in particular the role of the government banks, is needed to guide scheme designs and to enable targeting of the poor. A pro-active Microfinance Forum could play a central role in the whole process, both as a source of information and research, and as a focal point for policy advocacy.

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    Bibliographic Info

    Paper provided by EconWPA in its series Finance with number 0110001.

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    Length: 39 pages
    Date of creation: 11 Oct 2001
    Date of revision:
    Handle: RePEc:wpa:wuwpfi:0110001

    Note: Type of Document - ; pages: 39; figures: included. Survey commissioned by the British Department of International Development (DFID) and the State Bank of Vietnam (SBV).
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    Keywords: microfinance; Vietnam;

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    1. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    2. Dailami, Mansoor & Giugale, Marcelo, 1991. "Reflections on credit policy in developing countries: its effect on private investment," Policy Research Working Paper Series 654, The World Bank.
    3. Reinhart, Carmen & Ostry, Jonathan, 1995. "Saving and real interest rates in developing countries," MPRA Paper 13352, University Library of Munich, Germany.
    4. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    5. Fry, Maxwell J., 1982. "Models of financially repressed developing economies," World Development, Elsevier, vol. 10(9), pages 731-750, September.
    6. Seibel, Hans Dieter & Kunkel, Carmen R., 1997. "National Consultation-Workshop on Alternative Mechanisms for the Promotion of Microfinance in Vietnam," Working Papers 1997,3, University of Cologne, Development Research Center.
    7. Balassa, Bela, 1989. "Financial liberalization in developing countries," Policy Research Working Paper Series 55, The World Bank.
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    Cited by:
    1. Dufhues, Thomas & Buchenrieder, Gertrud, 2005. "Outreach of credit institutes and households' access constraints to formal credit in Northern Vietnam," Research in Development Economics and Policy (Discussion Paper Series) 8535, Universitaet Hohenheim, Department of Agricultural Economics and Social Sciences in the Tropics and Subtropics.
    2. Nghiem, Son & Laurenceson, James, 2006. "NGO Microfinance in Vietnam: Stakeholders' Perceptions of Effectiveness," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25594, International Association of Agricultural Economists.
    3. Sougata Ray & Sushanta Kumar Mahapatra, 2014. "Penetration of MFIs among Indian States: An Understanding Through Macro Variables," CEF.UP Working Papers 1401, Universidade do Porto, Faculdade de Economia do Porto.
    4. Tra, Pham Thi Thu & Lensink, Robert, 2006. "The Determinants of Loan Contracts to Business Firms: Empirical Evidence from a Private Bank in Vietnam," Working Paper Series RP2006/86, World Institute for Development Economic Research (UNU-WIDER).
    5. Khoi, Phan Dinh & Gan, Christopher & Nartea, Gilbert V. & Cohen, David A., 2013. "Formal and informal rural credit in the Mekong River Delta of Vietnam: Interaction and accessibility," Journal of Asian Economics, Elsevier, vol. 26(C), pages 1-13.


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