Nghe An Social Policy Bank: Positive signals from raising loan limit

Support loans for production development

In February 2019, the Vietnam Bank for Social Policies (VBSP) issued a document guiding the implementation of increasing the maximum loan amount and loan term for poor, near-poor, newly escaped-poverty households and lending for socio-economic development in ethnic minority and mountainous areas.

Since the beginning of 2019, the Prime Minister and the Vietnam Bank for Social Policies have continuously issued documents on increasing the loan amount and loan term for many programs. That is Decision No. 12/QD-HDQT dated February 22, 2019 of the Board of Directors - Vietnam Bank for Social Policies on increasing the loan amount and loan term for poor households, near-poor households, and newly escaped-poverty households; lending for socio-economic development programs in ethnic minority and mountainous areas according to the provisions of Decision No. 2085/QD-TTg dated October 31, 2016 of the Prime Minister, from March 1, 2019, the above credit programs are lent by the Vietnam Bank for Social Policies from 50 million VND/household to a maximum loan of 100 million VND/household, with a maximum loan term of 120 months.

Social Policy Bank staff disburse capital to people at a transaction point in Nghia Yen commune (Nghia Dan). Photo: Quang An

Decree No. 74/2019/ND-CP dated September 23, 2019 of the Government on amending and supplementing a number of articles of Decree 61/2015/ND-CP dated July 9, 2015, from November 8, 2019, increased the maximum loan amount for employees to VND 100 million/employee, for production and business establishments to a maximum of VND 2 billion/project and not exceeding VND 100 million for 1 employee to create jobs to maintain and expand employment. Next, Decision No. 1656/QD-TTg dated November 19, 2019 of the Prime Minister, from December 1, 2019, increased the loan amount for the student program from VND 1.5 million/month/student to VND 2.5 million/month/student.

Accordingly, from March 1, 2019, credit programs at the Bank for Social Policies such as: Loan program for near-poor households; Loan program for newly escaped poverty households and Loan program for socio-economic development in ethnic minority and mountainous areas according to Decision No. 2085/QD-TTg dated October 31, 2016 of the Prime Minister are allowed to borrow at the maximum level applicable to poor households in each period, the maximum loan level is increased to 100 million VND/borrowing household and no loan guarantee is required.

Women in the savings and loan group of Xieng village, Mon Son, Con Cuong develop brocade weaving with loans from the Vietnam Bank for Social Policies. Photo: Thu Huyen

Regarding the loan term, the Social Policy Bank increased the maximum loan term for the poor household lending program to 120 months (the current loan term is 60 months). Accordingly, the near-poor household lending program has the same loan term as the poor household lending program, with the maximum loan term increased to 120 months.

The specific loan amount and loan term for each borrowing household are based on the purpose of using the loan, production and business cycle, equity capital, the borrower's repayment capacity and the loan source of the Social Policy Bank. In case the borrowing household is a subject of the above credit programs and is using the loan effectively, paying interest on time as agreed, if there is a need to borrow more capital to implement a feasible production and business plan, it can borrow more but the outstanding loan amount must not exceed 100 million VND/household.

Policy Bank staff and loan group visited the loan model of Ms. Nguyen Thi Trinh's household in Moi Lap hamlet, Nghia Yen commune, Nghia Dan. Photo: Thu Huyen

Raising the maximum loan level for the poor, near-poor and socio-economic development loan programs for ethnic minority and mountainous areas of the Vietnam Bank for Social Policies to increase people's access to capital in all regions nationwide is one of the solutions to contribute to pushing back informal credit together with other types of credit institutions in the banking sector.

Mr. Tran Khac Hung - Director of the Provincial Social Policy Bank

Promoting the effectiveness of loan capital

Implementing the Prime Minister's Decisions and Government Decrees, Nghe An Provincial Bank for Social Policies has directed district-level transaction offices to provide additional loans and increase the loan amount by January 31, 2020, with a total outstanding loan balance of VND 8,390 billion, including additional loans for households with increased loan needs and new borrowers, with an amount of VND 21.1 billion, and more than 1,000 borrowers. Some programs with high outstanding loans include the HSSV program with a loan amount of VND 13 billion, including 912 customers, with an average loan of VND 14 million per customer. The loan program for poor, near-poor, and newly escaped-poverty households with a loan amount of VND 6.7 billion, including 98 customers, with an average loan of over VND 68 million per customer. The job creation loan program with an amount of VND 1.3 billion, including 15 customers, with an average loan of over VND 86 million per customer.

Thanks to loans from NHCS, many households in Anh Son have escaped poverty. Photo: Thu Huyen

Some district-level transaction offices of the Social Policy Bank disbursed large amounts of loans, such as: Dien Chau 1.64 billion VND, Thanh Chuong 2.2 billion VND, Quynh Luu 850 million VND, Vinh City 2 billion VND, Do Luong 1.35 billion VND... In Thanh Chuong district, Nguyen Doan Vu's household in Trang Tho village, Xuan Truong commune borrowed 80 million VND to buy a multi-function plow; Nguyen Thi Hoai's household in hamlet 3, Tran Thi Phuong's household in hamlet 5, Thanh Ha commune, each borrowed 100 million VND to buy breeding buffaloes and plant tea; Hoang Thi Sang's household in An Hoa hamlet, Thanh An commune, borrowed 100 million VND to plant tea and acacia. Currently, these households have effectively promoted the loan capital and developed their household economy.

In Quynh Luu district, Mr. Chu Van Cuong's household in hamlet 3, Quynh Giang commune, borrowed 100 million VND to raise buffalo, cows, chickens, ducks, and geese; Le Ba Quang's household in hamlet 10, Quynh Hau commune borrowed 100 million VND to buy a concrete mixer and a steel making machine for construction works; Tran Thi Hien's household in hamlet 11, Quynh Hau commune, borrowed 100 million VND to buy breeding cows and raise fish, chickens, and ducks.

Many policy beneficiaries in Hoang Mai Town have effectively developed their economy thanks to loans from the Social Policy Bank. Photo: Thu Huyen

In Hoang Mai town, Mr. Nguyen Van Nhan in Hong Phong block, Quynh Phuong ward borrowed 100 million VND from the job creation program to invest in upgrading the wood workshop. Mr. Nhan said: “In 2019, I invested in upgrading the wood workshop to expand the production scale. The capital for upgrading required 200 million VND, the family did not know where to borrow money with an interest rate that was not too high, a long loan term to have time to repay the debt, then the local Youth Union organization informed about the new loan source from the Bank for Social Policies. With a loan of 100 million VND, a loan term of 40 months, an interest rate of 7.92%/year plus the equity capital of 100 million VND, my family was able to implement the plan to upgrade our business workshop. Currently, production at the wood workshop is effective, creating many jobs for children in the area."

Ms. Nguyen Thi Hai - Deputy Director of the Social Policy Bank of Hoang Mai town said that currently in the area, there are only 3 households with higher loan amounts, each household from 80 - 100 million VND. Although the higher loan amount creates conditions for policy beneficiaries to effectively use capital, we are still cautious in reviewing applications to ensure that capital is used most effectively, avoiding the situation of taking advantage of the program to "borrow"...
Focusing on disbursement in the spirit of cautious lending for the limit increase program is also the thinking of many localities today. With the responsible participation of the staff of the Social Policy Bank as well as political and social organizations and localities, it is expected that in 2020, the Nghe An branch of the Social Policy Bank will continue to increase its outstanding loan balance by at least 8%, expected to increase by 860 billion VND./.