Microfinance Development Program – Subprograms 1 and 2: Program Completion Report
sector: Finance | country: Viet Nam, Socialist Republic of
Through its compliance with the agreed Microfinance Development Program (MDP) policy actions, the government made remarkable progress during 2008-2014 in creating a conducive policy and regulatory environment for developing inclusive and sustainable microfinance. Despite this, the issuing of implementing rules and regulations (IRRs) related to the licensing requirements for microfinance institutions (MFIs) is still pending. The government attributes the delay to its desire to await a Prime Minister Decision on unlicensed microfinance operations. This seems necessary for a holistic approach to be taken so that licensed and unlicensed microfinance operations can achieve their full potential in reaching unserved and underserved clients and to clearly demarcate the regulations on licensed and unlicensed microfinance entities.
A lesson learned from this delay and the MDP’s implementation overall is the need to allocate ample time when deciding policy actions for IRRs to be issued in Viet Nam, due the consensus-building approach the government has adopted toward regulatory formulation. It also took longer than expected for the IRRs for the People’s credit funds (PCFs) to be issued. The State Bank of Vietnam (SBV) has been cautious during this process to ensure that new regulations are appropriate; and that they are endorsed by the SBV departments involved, as well as by the ministries concerned (e.g., the Office of the Government, the Ministry of Finance or MOF, and the Ministry of Planning and Investment) and other stakeholders.
Implementation has also revealed an urgent need to enhance the information technology (IT) capabilities of the PCFs and MFIs so that the credit reporting and information exchange can be improved. The MDP helped the SBV standardize the reporting requirements for PCFs and MFIs and set up the microfinance information exchange system within the National Credit Information Center (CIC). However, a majority of these small- sized credit institutions lack the skills and standard IT systems to properly comply with the new reporting standards. This makes it difficult to consolidate and analyze reports from these credit institutions effectively.