|Farmers receive a loan from the People's Credit Fund in Bac Giang Province's Luc Ngan District. People's credit funds should be allowed to offer cheap credit services to compete with commercial banks, experts say. — VNA/VNS Photo Dinh Na
HA NOI (VNS)— The Government should enable people's credit funds to offer cheap credit services so that they can compete with commercial banks and develop sustainably, a conference heard on Thursday.
The people's credit-fund system has helped provide credit services to people in rural and remote areas who have difficulty accessing commercial bank services, said Tran Quang Khanh, chairman of the Co-operative Bank of Viet Nam (formerly known as the Central People's Credit Fund).
However, he said that as commercial banks were continually opening more branches, people's credit funds were at a disadvantage.
Nguyen Tien Huan, chairman of the Quang Trung People's Credit Fund based in Ha Noi, said the funds operated on a small scale.
Their customers often sought short-term loans, making them vulnerable to fluctuations in financial markets.
Huynh Thi Ri, deputy chairwoman of the management board of the My Binh People's Credit Fund in southern An Giang Province's Long Xuyen District, said credit funds had weak financial capacity, poor management and no modern technology so they could not compete with big commercial banks.
Under current regulations, mobilising interest rates for loans of under-12-month terms set for the funds is a maximum 8 per cent per year, but the ceiling rate for commercial banks is 7.5 per cent per year.
Credit fund lending rates for agricultural production is 11 per cent per year, while the rate offered by commercial banks is a maximum of 10 per cent.
The marginal difference in interest-rate regime made credit funds less attractive than commercial banks, Ri said, adding that the State Bank of Viet Nam should reconsider the point.
Besides, income corporate tax imposed on the funds is now 20 per cent, similar to that imposed on other enterprises, which did not encourage the funds to develop.
Ri also suggested the Ministry of Finance allow the funds themselves to decide the payment of dividends to members contributing capital, rather than adhering to a set rate as at present.
She said the State should also have policies to support large scale agricultural production and rural development, so that the funds could be used to boost long and medium term lending.
People's Credit Funds are commune-based entities, jointly owned, operated and managed by members to provide savings and credit services to farmers and small entrepreneurial households.
The funds are managed on a model of self-help, self-organisation, and managerial autonomy. They collect deposits from both members and non-members. However, loans are only provided to members.
In the past 20 years, 1,200 People's Credit Funds have been established, operating in 53 cities and provinces. — VNS