Microfinance versus poverty reduction in Vietnam – Diagnostic test and comparison

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Over the past twenty five years of renewal,  under the correct and innovative direction of the Party and the Government, Vietnam has made impressive achievements in economic development and poverty reduction.  Among these important achievements are encouraging contributions of microfinance activities with the active participation of microfinance organizations and  programs through out the country.  By assisting the poor and disadvantaged groups, microfinance activities have helped them overcome difficulties and challenges to constantly rise to family economic development and contribution to local economic development.  It is a proven fact that microfinance is an activity with deep social significance and is increasingly growing stronger in many countries on all continents, especially in the developing countries including Vietnam.

Vietnam has determined that the three essential pillars to ensure the country’s sustainable development include high economic growth in close connection with to social equity; poverty reduction; and environmental protection. With these goals, microfinance activities in Vietnam have shown an important role in strengthening financial support through the step by step response to the demands for loans and financial services for economic development, particularly in rural areas and mily level. Microfinance activities have increasingly proven their role in the society.  This is an economy in which there are communities who are living in poverty, who need financial support, in which a large population meet with economic difficulties, earning low income and really need help, especially from the microfinance institutions and programs in order to create income and improve their living. It is possible to confirm that microfinance activities in Vietnam in the past two decades have been making considerable contributions to poverty alleviation of the country, although these activities have not been able to maximize their potentials and influence to the society in general and the the poor communities in particular. Microfinance operations has been making positive impacts to income generation and assets building for the poor and the poorest who are unable to access formal loans resources.  With the support from the microfinance institutions with loans and knowledge on production and business, their social status has been gradually improved.  In fact, customers of microfinance organizations are of different segments.  Thus, the levels of impacts to poverty reduction are different and the general living standards have also been increased thanks to many different factors. At present, the microfinance sector Vietnam are beginning to develop towards professionalization and sustainability.  A number of microfinance organizations and semi-official programs are undergoing an important reform process innovation in order to expand operation, improve management capacity, reduce costs, diversify products and services to response to customers demand in order to achieve healthy development and sustainability with the goal to continue to contribute to poverty alleviation and economic development.

Although microfinance activities have been recognized in part as one of the effective tools contributing to poverty reduction, but to date, Vietnam has not been able to organize any research to assess its impact on poverty reduction and national reforms. Starting from the characteristics of the microfinance market in Vietnam and microfinance organizations in the microfinance market in recent years, in order to clarify the important contribution of microfinance in national reform programs and economic development, on the basis of the actual operations of microfinance in Vietnam, the topic of Microfinance versus poverty reduction in Vietnam: diagnostic test and comparison” has been selected for this study. With the participation of researchers and experts with a wealth of experience and knowledge of  microfinance from the Vietnam Banking Academy and the National Economics University, in coordination with the Vietnam Microfinance Working Group (VMFWG), and with funding support from the Citi Foundation, after reviewing the literature and conducting field surveys and workshops, by means of secondary data collection and gathering information directly from customers of the microfinance organizations (the microfinance institutions; People’s Credit Funds; and Bank and Social Policy), the research team has been able to finish the study of which the results are presented in this book in order to provide information on microfinance activities in Vietnam as well as its impacts on poverty reduction based on which the study proposes a number of solutions and suggestions to improve the effectiveness of microfinance operations in Vietnam in integration and development.

Please download the reseach report here: Microfinance versus poverty reduction in Vietnam – Diagnostic test and comparison