Nguyen Van Ly, director general of the Bank for Social Policy, spoke with Tin tuc (News) newspaper to explain the bank's new scheme to lend money to needy students in the 2013-14 school year.
What are the new credit policies you are offering to students?
Under the Prime Minister's Decision, each student is allowed to borrow VND11 million (US$520) per year from the new 2013-14 school year. This represents an increase of VND100,000 ($4.7) from the previous school year.
We plan that in the first semester, our bank will set aside an additional sum of VND650 billion ($30 million) to lend to the students. Thus, in total, about VND3 trillion ($142 million) will be available for student loans. It is projected that in this school year, we will need about VND5.5 trillion ($264.4 million).
I had to concede that in the previous school year, it was almost a nightmare for us to seek the funding to meet the students' demand. However, this year, thanks to the repayment deadlines for graduates we are able to meet the increasing demand for student loans.
Loans to students are quite different from other preferential credits that our bank has been offering. Under the PM's decision, the size of the loan is based on the number of eligible students. The mandate given to us is not to let any students miss out on school due to financial difficulty.
Currently, there are 203,000 saving and lending groups, up to 11,000 transaction units at the communal level and many bank transaction offices at the district level offering the students' lending services.
As the new school year has just started, to meet the high demand of students we have decided to increase our services in communes to meet their needs and help cut traveling costs for students and their parents.
What is the reasoning behind repayment deadlines for graduates to pay back loans?
There are several reasons.
Firstly, the programme needs to be able to respond to the needs of both parents and students. It enjoys the support from people from all walks of life and even the whole political system. Because of this, our bank asked the Government to allow us to change the lending model, to lend to households with students rather than just the students themselves.
Another factor in our decision was family tradition and the communal culture in Viet Nam. As is Vietnamese tradition, reputation is important in our culture, particularly in the countryside. As a result, we have been successful in using the revolving fund to lend to new needy students.
In addition, the Government has also decided to reduce the interest rate for households which pay back the loan before the matured date. I should also mention the communication programme we have implemented to help the people understand the Government's policy to help needy students.
Does that mean the capital shortage has been settled?
To make the programme sustainable, the Bank for Social Policy has asked the Government to provide us with a sustainable flow of funds. Of the VND36 trillion ($1.7 billion) owed by students at present, only VND6-7 trillion ($285-333 million) came from the State budget. The remaining bulk, the bank has to borrow using state bonds and other sources. This is a big problem for us.
In addition, many parents have asked us to increase the size of the loans. I myself support their requests. The current VND1.1 million per student per month is too little for a student. It should be increased by at least 50 per cent to meet half their monthly expenses.
Many families living in the countryside have two children studying at university, but they cannot access the loan because they do not fall into the ‘poor family' category. I think we should do something to help these households. — VNS