The Job Creation Credit Program: Learnt Lessons and Experiences from Vietnam Bank for Social Policies

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

Over the past thirteen operation years, the job creation loan program from Vietnam Bank for Social Policies has generated new jobs for more than three million laborers, making such a significant contribution to mitigating the unemployment rate from 5.87% in 2003 to 2.31% in the end of 2015. To achieve the outstanding achievement is subject to a long term process of making effort and renovation in the credit policy for job creation in line with the actual practice in VBSP. Up to now, the utmost expectation of VBSP is aimed to mobilize more capital source from domestic and international organizations and donors so that VBSP could extend loans timely to respond with the increasingly borrowing demand of enterprises and laborers.

The the job creation program credit line in VBSP has generated jobs for more than three million laborers over the past years

Remembering the operation period in 2003 – The first establishment year, VBSP coped up with too much difficulty when taking into operation due to the limited capital source, shortage of facilities and infrastructure, backward technology, lacked and inexperienced staff. Moreover, VBSP received three preferential credit programs including credit for poor households from Vietnam Bank for Agriculture and Rural Development, credit for disadvantaged students from Vietnam Bank for Industry and Trade and job creation loan from State Treasury with too high default rates. Total outstanding loans of job creation program being handed over from the State Treasury is VND 1,533 billion, the delinquency rate accounted for 10.1% which threatened so high credit risk for VBSP at that time.

In such a very difficult situation, a question for VBSP is how to improve the credit quality, decrease the non performing loan rate for the job creation program.

Right after receiving the job creation program from the State Treasury, VBSP coordinated closely with local authorities and mass organizations to speed up the loan analysis progress, reviewing and addressing bad debt cases carefully, actively formulating measures on credit quality improvement and decrease non-performing loan rate.

More than three million employees have stable jobs

During the past 13 years, total capital source of job creation increased from VND 1,000 billion in 2003 to VND 6,858 billion as of 30th June 2016, total outstanding loans achieved VND 6,530 billion, increased by VND 4,997 billion compared to the hand-over period’s , generated jobs for more than three million laborers.



One of many customer success stories from the job creation program is the handicraft business of Pham Thi Ngan households in Tay An commune, Tien Hai District, Thai Binh province. Starting business since 1996, but up to 2003, her traditional handicraft business has developed well. Remember the early days, she said: “In the early days, I only had an old bicycle to come to marketing and shipping products, I met with many difficulties and obstacles in production development due to shortage of capitals. Fortunately, VBSP lend us VND 50 million from the job creation program. Thanks to the efficient loan use, I continued to borrow VND 400 million from VBSP to expand business and production”. With a product diversification in terms of categories, models etc., Ngan has strived hardworking on searching stable markets to export traditional products to Japan, USA, France and China. Currently, her business has brought about permanent jobs for 20 employees directly with averaged income of VND 3 million / person / month and seasonal jobs for 7,000 laborers with the monthly income up to VND 2 million / person.

Another successful story of customers is a fine art furniture business owned by a person with disability named Lai Ngoc Diep in Vu Ninh Commune, Kien Xuong District, Thai Binh province. Borrowing a loan of VND 300 million for job creation from VBSP in 2014, Diep upgraded and expanded a 200m2 – factory, purchased more raw materials, equipment and machinery for production of fine art furniture. Currently, his business has generated regular jobs for 10 employees and 10 persons with disabilities with a monthly income of VND 5-6 million / person. Diep shared: “Thanks to the funding support from VBSP, I have more favorable conditions to expand production, appeal stable employment for laborers and create opportunities for people with disabilities to improve living standard and their position in society.

According to the evaluation of the Department of Labor, Invalids and Social Affairs in Thai Binh province: “The job creation credit program of VBSP has made such an active contribution to supporting loans for enterprises and households to generate employment and self-employment, expand business and production, diversification of commodity in the market in rural areas”.

The job creation credit has contributed to new employment generation for society, recovery for traditional handicraft industry, providing loans for enterprises and households to invest and expand business and production, creating jobs for millions of employees, women, people with disabilities, making such a significant contribution to declining the unemployment rate, improving living standard for laborers. The non performing loan rate is down year by year, making up 0.74% in total loan portfolio in the end of 2015, a decrease of 9.36% compared to 2003. The delinquency rate reduction reflected the increasingly growth of credit quality and the effective management of VBSP.

The credit from job creation program also contributed to changing the perception of small business households who have not caught up with the large production approach. Through this credit program, there have been a lot of excellent business and production models not only in urban areas but also in remote, mountainous, rural areas, islands and in ethnic minority’s communities.

According to the evaluation of the Ministry of Labor, Invalids and Social Affairs, the job creation credit program along with the operation model of VBSP is effective and efficient. To achieve the fruitful result on mobilizing capital source, organizing and implementing the credit programs, VBSP has formulated comprehensively the organizational model and credit management mechanism in accordance with the actual practice of Vietnam. This is a powerful operation network of VBSP ranging from central level to grass-root level with 63 provincial branches, 629 district transaction offices run by over 9,000 employees who have devotion and experience in credit operation.

The operation network of VBSP also covers around 11,000 fixed-date transaction points at commune level, which creates the most favorable conditions for targeted clients, especially poor households and ethnic minority households to access to inclusive finance. This large operation network has mobilized various resources and timely delivered micro credit to poor households and other disadvantaged groups in such a saving and safety manner.

Moreover, VBSP has established a partnership model with mass organizations including Vietnam Women Union, Vietnam Farmer Union, Vietnam War Veteran Union and Youth Union in the lending process such as coordinating with VBSP to communicate credit policies to poor households and other disadvantaged groups, establish and supervise savings and credit groups, monitor the loan use process, remind borrowers to repay loans on due time etc. VBSP collaborates with mass organization to establish nearly 200,000 savings and credit groups. Each savings and credit group includes 5 to 60 members who are targeted clients joining voluntarily the group to help one another. This initiative has encouraged the community participation in financial inclusion, deliver credit service timely to targeted clients, help them know-how to utilize loans for proper purpose to improve likelihood and sustainable poverty reduction. VBSP collaborates with local authorities to provide credit services timely and adequately to right, target clients. Acting as the key role in microfinance development and management, VBSP’s branches at level pro-actively organize and implement credit programs, instruct, control and supervise to improve lending quality. As a result, VBSP inclusive finance has become one of the economic leverages in poverty reduction and social security.

To promote the job creation credit program more effectively and efficiently, respond with the increasing borrowing demand, VBSP always makes its effort to figure out measures to mobilize the capital source, study the international practice and successful lessons and experience to renovate the loan procedures of the job creation program. According to the direct feedback from local authorities and mass organizations and targeted clients, the borrowing needs of residents is increasingly high whereas the funding source of the job creation program is very limited.

To satisfy with the borrowing demand of enterprises and employees, create stable jobs and improve local living standards, especially poor households and other disadvantaged groups in remote, rural areas, VBSP would like to promote cooperation with domestic and international financial organizations and donors to develop stable, long-term capital source with preferential interest rate and technical assistance for strengthening the job creation program.

In apparel with providing loans for job creation, VBSP pro-actively boosts more close collaboration with relevant agencies at level (i.e. Agriculture and Fishery Extension Center, mass organizations etc.) to provide training, guidance and orientation for borrowers in terms of business, production and advanced technology transfer. VBSP shall coordinate with local mass organizations and savings & credit groups to disseminate and communicate preferential credit programs to poor households and other disadvantaged groups in remote, mountainous, rural areas, islands as well as encourage borrowers to use loan for right purpose, repay on time, supervise and manage the credit operation better. To conduct these measures will be a leverage for VBSP to optimize the preferential credit operation in society, generate new employment for workers, reduce the unemployment rate, contributing to new rural development, poverty reduction and social security.

BOX: According to the prevailing regulation of the Job Creation program, the lending interest rate for production establishments and business (including small and medium enterprises, cooperatives, cooperative groups and household business) and employees is equal to the current interest rate for poor households. For production establishments, businesses with at least 30% of workers being people with disabilities, ethnic minority; both people with disabilities and ethnic minorities shall get loans from National Employment Fund with interest rate equaling to 50% of which applicable to poor households. The loan term shall be 60 months, specific loan terms shall be discussed between the bank and borrowers. The maximum loan amount is increased from VND 500 million per project to 01 billion dong but not exceed VND 50 million per new job.