Restructuring credit funds: Qualitative change

(Baonghean) - The People's Credit Fund (PCF) system in Nghe An is operating quite stably with 55 funds and a total charter capital of about 200 billion VND. Restructuring credit funds is a bridge to help PCFs operate more effectively.

According to Circular No. 39/2011/TT-NHNN dated December 15, 2011, credit institutions with total assets of VND50 billion or more are required to conduct independent audits. This helps make the operations of the units more transparent, thereby minimizing risks of system spread. After Circular 39, on December 29, 2011, the State Bank of Vietnam issued Circular No. 44/2011/TT-NHNN (Circular 44) on internal control and internal audit systems. In particular, the State Bank of Vietnam has separate regulations based on the specific characteristics of the scale, level, and applicability of credit institutions.

Transaction at QTDND Van Dien, Nam Dan

In Nghe An, Nghi Huong People's Credit Fund, Cua Lo is considered an effective credit institution. Currently, Nghi Huong People's Credit Fund has 2,396 members. The Board of Directors, Supervisory Board, and Executive Board maintain regular meetings, evaluate and seriously review the results of management and administration in business activities, and internal control and inspection work. Focus on reviewing the implementation of indicators to ensure safety in operations, credit quality, compliance with accounting and statistics regimes, treasury regimes, etc., creating momentum for the fund to operate according to its purpose and legal criteria, and to develop steadily, safely, and effectively.

Mr. Nguyen Duc Hanh - Director of Nghi Huong QTD said, we strictly comply with the lending regulations for customers and internal regulations on credit activities, strictly implement the steps in lending, especially the appraisal and inspection of loan use to ensure effective credit investment. Debt classification, provisioning for credit risk handling are strictly implemented, monthly review of overdue debt transfer and debt classification according to prescribed groups, provisioning for risk accurately according to prescribed ratios. Comply with regulations on safety ratios in operations, the minimum capital safety ratio as of December 31, 2015 is 12.5/8% according to regulations. The maximum credit limit for a customer does not exceed 15% and a customer group is 20% and 30% of equity capital according to regulations. The maximum ratio of short-term capital for medium and long-term loans shall not exceed 20% as prescribed.

As of December 31, 2015, the Fund's total medium and long-term capital reached VND 65,891 billion, of which short-term capital for medium and long-term loans: VND 24,484 billion. Outstanding medium and long-term loans as of December 31, 2015: VND 26,152.5 billion, accounting for 39.7% of medium and long-term capital.

From the loan capital of the credit fund, people have capital to invest in developing the household economy.

Implementing the restructuring plan, Thanh Linh and Thanh Chuong People's Credit Funds always comply with the regulations on safety ratios as prescribed by the State Bank, the ratio of fixed investment and purchase is under 50% of the total charter capital and the reserve fund to supplement charter capital. Strengthening the work of urging debt collection and lending, disseminating mobilization and lending interest rates publicly at the office, creating favorable conditions for members and customers to borrow capital as well as deposit transactions. At the same time, restructuring is carried out in the following aspects: organizational structure, operating regulations, and performance indicators. Currently, Thanh Linh Commune Credit Fund has a total capital of more than 40 billion VND, of which mobilized capital is 33 billion VND, outstanding loans are 32 billion VND. In the past time, the Fund has regularly directed the credit department to strengthen the appraisal and urging the collection of debts that have been and are due, the bad debt ratio is low, under 1%.

Bui Thi Thuong - Director of the People's Credit Fund of Thanh Linh commune said: In the coming time, we will continue to mobilize people to better understand the activities of the People's Credit Fund through propaganda forms so that people can participate in establishing members, borrowing capital and depositing money to increase the scale of the unit's operations; adjust the mobilization and lending interest rates reasonably in each term and each stage to increase capital sources and increase outstanding debt. Along with that, we will coordinate with local authorities in urging the collection of overdue debt, especially overdue debt of group 5.

Currently, there are 55 funds in the province with a total charter capital of about 200 billion VND. In recent times, the People's Credit Funds have been operating according to the criteria of supporting members, not pursuing profits, mainly ensuring the costs of existence and development. The People's Credit Fund system contributes to the development of the collective economy, building new rural areas, limiting the situation of usury...

Mr. Cao Van Hoi - Deputy Director of the State Bank said: Currently, 100% of the People's Credit Funds in the area have achieved or exceeded the plan set out according to the charter capital structure plan; most of the Funds have good capital mobilization work among members, proactively serving in lending for member development; no Fund has a ratio of investment and purchase of fixed assets exceeding 50% of charter capital and reserve fund to supplement charter capital...

According to the assessment of the State Bank of Vietnam, Nghe An branch, the operations of the People's Credit Funds in recent times have been basically stable and have developed well, most of the People's Credit Funds have made a profit. Risk management at many People's Credit Funds has been given more attention; services have been developed to suit the management capacity of the units...

“For a long time, the operational process in the activities of the People's Credit Funds has been considered a weak link and is being neglected. Therefore, requiring the People's Credit Funds to comply with Circular 39 and Circular 44 are synchronous and practical steps for the People's Credit Funds to self-improve and improve the quality of their operations, which is very practical for the People's Credit Fund system because up to now, the role of linking and developing the system of the Central People's Credit Fund with the People's Credit Funds in the localities has been vague." - Mr. Cao Van Hoi - Deputy Director of the State Bank of Vietnam, Nghe An branch said.

Thu Huyen