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Credit to help households in need

Update: September, 10/2014 - 09:32

Nguyen Van Ly, the deputy director of the Viet Nam Bank for Social Policies, spoke with Thoi bao Ngan hang (Banking Times) newspaper about plans to help households that have recently escaped poverty.

Why will preferential credit policies be implemented for households that are newly escaped from poverty when the country still has a huge number of poor people?

The Government has agreed to revise its preferential credit policies because implementation of its poverty reduction programme in the past years has revealed a policy gap. Households that are newly escaped from poverty have nowhere to go when they need to borrow money for the economic development of their families.

They currently cannot avail of preferential loans and have no access to credit from commercial banks. This has made the poverty reduction programme less sustainable and has resulted in a number of households becoming poor again.

Last year, the Government issued Decision 15/2013 on credit policy for households that are nearly poor. What are your thoughts regarding the implementation of this policy?

With this decision, the Government has decided to permit households that are nearly poor to get preferential loans from the VBSP because there is a thin line between poor and nearly-poor households.

The nearly poor are quite happy about this policy. To date, more than 700,000 of these households have borrowed a total of around VND14 trillion (US$666 million) in loans. I would say that this is an active measure to maintain the sustainability of poverty reduction results.

What are the criteria for preferential loans for the nearly poor?

I think the criteria for households newly escaped from poverty is quite clear. They used to be poor households and have recently escaped from poverty. The draft policy states that these households have an income level less than 130 per cent higher than that of poor households.

We will propose that the Government allow the nearly poor and the newly-escaped households to continue borrowing under preferential interest rates. By doing this, we could ensure equality and sustainability in poverty reduction.

Can you provide more information on interest rates and loan limits for households newly-escaped from poverty?

According to the draft policy, credit limit for poor and nearly-poor households will not exceed VND50 million ($2,380), with 0.6 per cent monthly interest rate for poor households and 130 per cent of the monthly interest rate of poor households for newly-escaped poverty households.

How will the VBSP prepare for the policy's implementation? From where will it get the money?

The VBSP currently has a total loan fund of VND130 trillion ($6.19 billion) with an average annual credit growth of between eight to 10 per cent. Priorities will be given to poor households living in disadvantaged areas, as we have implemented the preferential credit policy for near-poor households since 2013.

This month, a new capital source of around VND20 trillion ($952 million), including VND15 trillion ($714 million) from debt collection for capital turnover, will be added to our fund. That will be a very big capital source for future key VBSP programmes. — VNS

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