Microfinance institutions: Transition for safe and sustainable development

This post is also available in: Tiếng Việt (Vietnamese)

One of the goals set out in the ” National Comprehensive Financial Strategy until 2025, with orientations to 2030” approved by the Prime Minister is “Develop the system of organizations and programs which works safely, efficiently and sustainably, aim to serve the poor, low-income, women and micro businesses with a wide range of financial products and services , flexible, appropriate, contributing to the implementation of the Party and State’s policy on ensuring social security and sustainable poverty reduction ”.

Over the years, microfinance activities (microfinance) have been constantly innovating, developing both in scale and diversity, contributing to the country’s economic development and poverty reduction. Many studies indicate that micro-credit and access to micro-credit are important conditions that determine the ability to improve living standards and escape poverty; acts as an important mechanism to help overcome income-shocks.

In fact, microfinance in Vietnam has not really developed as living its potentials. Microfinance is not only a tool to reduce poverty, but also an integral part of the financial system. Vietnam microfinance organizations still have internal limitations such as unprofessional management, the sustainability indicators and financial capacity of microfinance institutions are not high.

In order that microfinance can develop effectively and play its role, one of the requirements is to improve the legal environment, synchronous policies, in accordance with the specific characteristics of microfinance activities. “It is necessary to take solutions and recommendations to microfinance institutions, state management agencies, and other stakeholders in order to create a favorable environment to support the transition process, contribute more effectively and encourage microfinance institutions to transforme into licensed organizations and take initiative, appropriate solutions and solutions. The transformation of MFIs is an inevitable development following the trend”

According to the Prime Minister’s Decision No. 20/2017 / QD-TTg approving the operation of microfinance programs and projects of political organizations, socio-political organizations, non-governmental organizations with specific contents on transforming microfinance projects into microfinance institutions. Accordingly, domestic political organizations, socio-political organizations, non-governmental organizations convert microfinance programs and projects into microfinance institutions in one of the following cases: Voluntary conversion; have total assets of VND 75 billion or more; have total outstanding loans to microfinance customers of VND 50 billion or more …

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