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VietNamNews

Microfinancing needs improvements: experts

Update: December, 13/2014 - 10:18
Transparent micro finance will help improve lives of poor and low-income people. — Photo businessnewsdaily.com
HA NOI (VNS)  — Experts urged increased transparency and an improved legal framework to allow poor and low-income earners to have access to financial services.

At a seminar on Thursday, experts said microfinancing services, created in the 1980s, increased accessibility of financial services to poor and low-income earners, which brought economic benefits to millions of households and contributed to the country's reduction in poverty.

However, there remains a need to improve the efficiency of microfinancing to assure the nation's sustainable development.

According to Pham Huyen Anh, Director of the Banking Operation Policy Security Department under the State Bank of Viet Nam, microfinancing institutions helped raise incomes of more than 90 per cent of its customers.

However, several rules regulating microfinancing operations were proved inappropriate and there was a lack of consistency among existing regulations, Anh noted.

The operation of microfinancing institutions has remained at a busy level, with loaning as a major activity, while other basic microfinancing services, such as pensions, money transfers and insurance, have not been developed.

Anh said the legal framework for providing microfinancing must be improved to enhance the financial and management capacities, as well as its transparency, adding that the operation of microfinancing institutions should be associated with the operation of other credit institutions.

Microfinancing expert Nguyen Manh Cuong said many requirements about microfinancing operations should be loosened, such as a minimum solvency ratio of 20 per cent, which he said was too high.

Also, experts have called for tax incentives to be provided to microfinancing operations, together with policies to encourage insurance companies to join with microfinancing institutions to bring insurance services to the poor.

The establishment of a microfinancing association was also essential, experts said.

As of the end of September, three of the country's microfinancing institutions had a combined equity of VND238.9 billion (US$11.2 million) with total deposits of VND439.2 billion ($20.7 million) and outstanding loans of VND787 billion ($37.1 million).

Notably, the ratio of bad debts of microfinancing institutions was very low, at 0.01 per cent, or VND75.2 million ($3,540). — VNS

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