Vietnam Bank
SOCIALIST REPUBLIC OF VIETNAM
for Social Policies
Independence - Freedom -----------------------Happiness
-----------------------------No: 316/VBSPHanoi, May 2nd 2003
Guidance on Lending to Poor Households
Pursuant
to
Charter
on
organization
and
operations of VBSP issued under decision 16/2003
dated 22 January 2003 of the Prime Minister, The
VBSP General Director provides herewith the guidance
on Lending to Poor Households as below:
1. Lending objective:
VBSP makes confessional loan to Poor Households for
the purpose of business production, life improvement
which contributes to the implementation of National
Program of hunger Poverty and unemployment Reduction
and social stabilization
2. Target groups:
2.1 Transaction offices, branches and unit under
VBSP and the trustee units of VBSP (here called the
“Lender”)
2.2 The “Borrower” who is the Poor Households
3. Borrowing Principles
The
Poor
Households
following principles:
are
required
to
satisfy
3.1 Use the loan properly as stated in borrowing
purpose
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3.2 Make repayment of interest and principal on due
as negotiated
4. Borrowing conditions
The lender shall review and decide lending once the
borrower meets following requirements:
4.1 To have permanent address or longregistration at the location of lending.
term
4.2 To be in the list of Poor Households of local
commune according to poverty standards defined by
MOLISA from time to time.
4.3 The borrower is not required for collateral and
is exempted from borrowing fee but must be a member
of credit- saving group, must be selected by the
group and in the list proposed to get loan with
certification of local commune people’s committee.
4.4 The owner of the Households or the authorized
person to deal with transaction is the person
representing the family to take all responsibility
in all relations/transaction with Lender, is the
person to sign the loan agreement and to make
repayment to the Bank.
5. The loan shall be used for following areas:
5.1 Lending to business, production and services:
a. To buy materials, seedlings, animals, fertilizer,
pesticide, animal foodstuff… for cultivation and
livestock.
b. To buy small working tools as:
c. To cover daily laborer expenses;
d. To invest in household handicraft work
e. To cover expenses relating to aquaculture raising
catching and processing
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g. To contribute to business production project
initiated by labor community and approved/allowed by
local government.
5.2 Lending to
improvement:
new
house
construction
and
implement
under
a. To build new house to
Government program/project.
house
each
b. House improvement: VBSP only makes loan to poor
households to improve house condition as fixing leak
roof or upgrade very bad conditions. The loan was
used to buy construction material or to cover hired
construction workers.
5.3 Lending to electricity connection:
a. To cover expenses relating to wire connection
from
central
network
of
village/commune
to
households: pillar, wire, lighting equipments...
b. To contribute to small hydro electricity, wind
electricity, sun electricity, generator for a group
of households where there is no national electricity
network.
5.4 Lending to clean water
a. To contribute capital
supplier to each household.
to
build
clean
water
b. In places without overall clean water development
project loan shall be made to drill wells; refining
tanks, tanks…
5.5 Lending to cover partly education need
To cover schooling fee: tuition, schooling material
of Poor Household’s children studying at secondary
schools.
6. Lending types and loan term
6.1 Lending types
- Short- term loans: loans with maturity below/up to
12 months
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- Medium term loans: loans with maturity from 12 to
60 months.
6.2 Loan term / duration:
Borrower and
based on:
lender
negotiate
the
loan
duration
- Purpose of borrowing
- Production/ Business cycle
business, production, service)
(for
lending
to
- Repayment capacity of Household
- Sources of lending of VBSP.
7. Lending interest rates:
7.1 Soft rates to Poor Household decided by the
Prime Minister from time to time and applied nation
wide. Specific lending rate shall be announced
separately by VBSP.
7.2 Aside from lending rates, Poor Households is not
required to any additional fee
7.3 Interest rates of lending from sources that VBSP
braches receive from local government, institutions
and individuals home and abroad shall be implemented
according to Trust Service Agreement.
7.4 Past due interest rate 130% of lending rate
8.
Lending methodology
The Lender shall apply one time lending. For each
borrowing, the Poor households and the lender are
required to perform all necessary procedures as
stipulated in this document
9. Loan Amount
The loan amount to Poor Households will be
determined based on: the borrowing demand, own
capital and repayment capacity of Households. Each
Poor household can borrow one or more times provided
that the total loan outstanding does not exceed the
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maximum loan amount per household determined by VBSP
‘BOD from time to time.
10. Loan documents/applications
The loan application set is provided by VBSP for
free and unifired nation-wide.
10.1 The list of loan application consists of:
a. Poor households: The Poor households prepare loan
application (Sample 01/CVHN) and send to CreditSaving Group.
b. Documents prepared by Credit- Saving Group:
- First time, at the establishment, the Group sends
to the Lender documents and papers as stipulated in
the Regulation on organization and operation of
Group such as the Minute of Meeting for Group setup and approval of operational regulations (Sample
10/CVHN)
- Each time of borrowing, the Group sends to the
Lender the list of Poor Household proposing loans
(Sample 03/CVHN)
- During operation, the Group prepares book keeping
monitor/supervise
the
lending,
interest
and
principal collection and saving mobilization of each
member
c. Documents prepared by Lender
- Notification of approval on list of Poor household
eligible for borrowing (Sample 04/CVHN)
- Notification of past due loan transfer, if any
(Sample 05/CVHN)
- Supervision letter after lending (Sample 06/CVHN)
d.
Document
jointly
household and lender:
prepared
by
Group,
Poor
- Credit and saving books (Sample 02/CVHN)
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- Authorization Agreement on interest collection and
saving mobilization (Sample 11/CVHN) if any
10.2 Filing the documents:
a. Poor Households: keeps the credit- saving book
b. Credit- Saving Group: keep all papers and
documents as stipulated at point 6, section 10.1
c. Lender:
- Accounting: keeps all original loan documents
which consist of those stipulated at section 10.1 of
this document except the monitoring book supervising
principle and interest collection of members (Sample
13/CVHN) mentioned at point b.
- Credit: Prepares and keeps following documents:
+ Record Book monitoring lending to Poor household
in managed location
+ List of Poor household in managed locations
+ Statistic reports on lending,
saving… of Poor households.
debt
collection,
The loan document has to be kept in a careful,
prudent and convenient manner with monitoring list
and be ensured safety. The person in charge of such
filing shall take full responsibility in case of
losses missing, or content changes. In case the
Credit Dept may need to use the loan document to
deal with urgency, they have to copy the data from
the original document.
11. Lending procedure
11.1 Poor household:
- Participate is Credit- Saving Group on a volunteer
basis.
- Poor households write/prepare loan
(Sample 01/CVHN) sent to Group leader.
application
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- In dealing with Lender, the owner or legal
authorized person needs to have Discard, if not,
needs to have his/her photo stick on Credit- Saving
Group to issue loan to the right borrower.
11.2 Credits- Saving Group:
a. Receive the loan application of member.
b. Organize meeting to select the Poor household
eligible for borrowing, make a list of these Poor
household
(Sample
03/CVHN)
attached
by
loan
application of member submitted to Commune People’s
Committee. At the commune level, Poverty Reduction
Unit confirms the borrowing household is those
belong to Poor household as regulated and legally
located at the commune. The Commune People Committee
confirms and approves the list of Poor household
borrowers to send to the Lender for review.
c.
Upon
the
certification
of
Commune
People
Committee, the Group is responsible for sending the
list as sample 03/CVHN to the Lender for approval
procedure and receiving the list of Poor household
being approved for borrowing (Sample 04/CVHN).
d. Announce/Inform the list of Poor household being
approved for borrowing, disbursement schedule and
location to member to implement following steps of
lending procedure.
11.3 For the Lender:
a.
The
loan
officer
consolidates
all
loan
application and the list as sample 03/CVHN from
commune (or towns), checks the eligibility, legality
of the loan document to submit to the Management
level for review and approval. This step shall not
last for more than 5 days.
In case the borrower fails to satisfy all loan
document requirements as stipulated, the loan
officer should return the loan application and guide
the borrower to comply with regulations.
b. Upon the approval of Poor household list demand
loans as sample 03/CVHM, the Borrower sends the
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approval to
04/CVHN).
Commune’s
People
Committee
(Sample
c. The Lender and Poor households will prepare/make
credit- saving book (Sample 02/CVHN)
This book shall replace loan agreement and shall be
considered as saving book. The credit- saving book
shall contain loan terms and condition and saving
condition; some criteria on business and financial
status of the borrower to be treated as basis for
lending. When borrowing, the lender will issue
credit- saving book to Poor household for long term
use and several times of borrowing, which would be
changed/replaced by a new one when all pages are
fully used. Each household will receive only one
book. The balance of credit and saving on the book
shall not exceed maximum loan size stipulated by
VBSP at any time.
d. Together with credit- saving groups to disburse
the loans directly to Poor household at the premises
of the Lender or at the commune’s office (town)
subject to announcement of Lender.
11.4 Disbursement
a. According staff, based on loan application and
the approved list as sample 03/CVHN, prepares
withdrawal slip as printed sample stipulated by the
Lender (Withdrawal slip).
b. The cashier based on the documentations, creditsaving books with adequate signatures and eligible
criteria to distribute cash to borrowing household.
C. At the end of the day, accountant, and cashier
close the books and reconcile as regulation.
d. In case the disbursement takes place, at the
commune (town) the Lender shall advance the money to
mobile group to distribute the fund at the commune
and settle upon their returns in compliance with
current accounting regulations. The carry of money
on the road needs to ensure safety as treasury
safety requirements.
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12. Loan maturity, principal and interest collection
Loan must be repaid in full
interest on due as committed.
the
principal
and
12.1 Principal collection: The Lender shall collect
principal directly from each household as following
regulations.
a. Short term: one time on due
b. Medium- long term: in installments: every six
months or once a year upon negotiation between
lender and borrowing household.
12.2 Interest Collection:
a. Two methods:
- Collect interest and principle (at the same time)
- Collect interest on a regular basis, monthly or
quarterly as agreed by both sides
b. For outstanding loan, the interest collection
shall be made on a regular basis, monthly or
quarterly on the outstanding balance upon agreement
between borrower and lender. For loans below 6
months, interest and principal are collected one
time on due. Un- collected interest of previous
period will be collected in following period.
c. For the past due loan, the interest is collected
at the same time the principal is collected. For the
non- performing loan (frozen loan), priority in
collection
is
given
to
principal
collection.
Uncollected interest will be recorded as off balance
sheet items for collection.
d. The collection of interest, savings (if any)
shall be made upon the Lender’s selection of
following manners: direct collection or authorized
collection for credit- saving groups. In all cases
of authorizing to groups to collect interest,
savings an agreement needs to be signed by the
Lender and Credit- Saving Group (sample 11/CVHN).
The authorizing to groups to collect interest and
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savings or not authorizing depends on the decision
of the Lender based on following condition.
- The group has to be formed and operates in line
with existing regulation of VBSP.
- The accreditation/reputation of the group with the
Lender and its members.
12.3 Collection loan, interest, saving (if any)
a. On weekly or monthly basis, the Lender sets the
transaction schedule at each commune (or town) and
publicly announces to each household on the lending,
collection of principal, interest and saving and and
other transactions.
b. For each collection of interest, principal,
saving, the Lender makes cash collection slip as is
made in 2 copies, Lender and Borrower each keeps one
copy.
c. Based on the cash collection slip, accountant
records in the credit saving book and makes new
balance updated within the day.
d. For each collection, the cashier of the Lender is
required
to
sign
all
signatures
on
relating
documents and on credit- saving book (including the
filing books of Lender and Borrower).
e. On regular basis (quarterly and annually); the
Lender checks and reconciles principal outstanding,
collected interest and saving between documents;
credit- saving book kept at the Lender and creditsaving book kept by the borrower.
12.4 Interest collection, saving collection through
credit- saving group.
a. For each interest, saving collection, creditsaving group should record fully all items as
regulated and signed in the credit- saving book kept
by borrower and at the same time makes three copies
of the list of interest and saving collection (as
sample 12CVHN) and records in the book monitoring
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lending and collection of interest and saving of
group (sample 13/CVHN).
b. The credit- saving group conducts the collection
of interest and saving (if any) on a regular basis
upon agreement between group and borrowing household
but has to pay collected amount in full to the
Lender on a regular basis as signed in the
authorized document. If the payment date of the
group coincide with the off- working day of the
Lender (as regulation), the group shall pay on the
first following working day.
c. When making payment, the group has to bring along
three copies of the list of interest, saving
collection (sample 12/CVHN) as the basis (lender
keeps one copy, group files one copy, and VBSP keeps
one copy).
d. The amount of payment to the Lender must the same
as the member written in the list.
13. Dealing with due debt:
13.1 Revolving loan (for harvest cycles)
a. Application: Only applies revolving loans for
short
term
loans
including
business/production
having
consecutive
cycles
as
the
previous
business/production cycle.
b. Conditions:
- The loan is due while the borrowing household has
demand
for
borrowing
for
the
following
business/production cycle.
- Having viable business plan for borrowing.
- The household has paid all interest of the loan in
full and still not getting out of poverty.
c. The maximum amount of such revolving fund shall
not exceed the balance in credit- saving book on the
date of revolving.
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d. The period for revolving loan is the period of
following production/business cycle but shall not
exceed the loan duration written in credit- saving
book.
e. The lending rate applies the current lending rate
at the time of revolving loan.
When having demand for revolving loan, 5 days prior
to the last payment date, the Poor household
prepares request for revolving loan (sample 07/CVHN)
submitted to Lender, and other procedures are not
though be repeated. The Lender shall not record
pretending lending/collection accounting entry.
In all cases of revolving loan, the Lender has to
record all items as regulated in both credit- saving
book kept at the Lender ands Borrowing household.
13.2 Adjustment of loan maturity
In
case
the
borrowing
households
having
difficulties, unable to pay principal at maturity as
agreed and written in credit- saving book because
the production/business cycle has not yet completed,
products have not been sold or borrowing household
faces
temporary
financial
difficulty
and
has
prepared request gore maturity adjustment (sample
08/CVHN), the Lender then shall review and consider
to adjust the loan maturity.
13.3 Loan rescheduling:
a. In case the Borrowing household fails to make
repayment on due because of natural disasters,
disease or other objective causes which has been
checked, certified by the Lender and has prepared
request for rescheduling (sample 09/CVHN) the Lender
then shall review and consider for rescheduling.
b.
Rescheduling
duration:
The
Lender
shall
reschedule the loan once or more times for each loan
provided that the total extension duration shall not
exceed 12 months for short- term loan and not exceed
1/2 loan duration of medium- long term loan as
written in credit- saving book.
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c. In case the borrowing household has demand for
rescheduling that above the rescheduling duration
limit due to object reason, the direction of the
Lender shall report to the General Director of VBSP
for review and consideration.
13.4 Past due transfer:
a. Cases of past due conversion
- Borrowing household
(wrong purpose).
uses
the
loan
improperly
- Having capacity to repay due loan but refuses to
pay or at the last installment the borrower is not
rescheduled his loan, the lender then shall convert
the entire loan balance into past due.
b. After such transfer to past due, the Lender shall
coordinate
with
local
government
and
social
political organization to seek for solution and
measure to recover the loan.
13.5 Procedures
rescheduling
for
loan
duration
adjustment
and
A. 10 days prior to payment due, the Lender shall
inform the borrower the amount due and the due date.
b. In case the borrowing household has demand for
rescheduling, loan duration adjustment submitted to
the Lender 5 days prior to the due date.
c. The credit officer checks, certifies and writes
comments in proposal of loan rescheduling and
duration adjustment to submit to management.
d. The management board of the Lender shall review,
consider and decide the loan rescheduling and
duration adjustment as regulations.
e. In all cases of loan duration adjustment and
rescheduling, both the Lender and the Borrower have
to supplement (add) in credit- saving book kept by
the Lender and borrower
14. Dealing with credit risks
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14.1 Borrower who fails to repay their debts due to
such objective causes as natural calamities, fires,
epidemics, changes in State policies or market price
fluctuations shall be handled as follows:
a. In cases where such occur on a wide scale, they
shall be decided by the Prime Minister.
b. In cases where such occur singly or locally, the
debts shall be extended or handled with the risk
reserve fund of the Social Policy Bank under
decision of the Bank’s Managing Board.
c. For damage caused subjectively by borrowers,
entrusted organizations or officials or employees of
the Social Policy Bank, these subjects shall have to
pay compensations and take responsibility therefore
before law.
15. Loan supervision
The monitoring and supervision
conducted as bellows:
of
loan
shall
be
15.1 Check prior to lending: being carried out at
the local level through a process of selection,
preparing a list of poor households proposing for
loan by the credit- saving groups and commune
people’s committee. Upon the receipt of loan
document, the loan officer shall check the legality,
eligibility of the document, borrowing condition,
and borrowers as stipulated in this document.
15.2 Supervision/check when lending: check the
disbursement to ensure the correct name of Poor
households in the approved list as sample 03/CVHN.
15.3 Supervision after lending:
a. The Lender shall conduct the supervision of loan
use on a regular basis of irregularly; conduct the
open reconciliation of debt at last once a year.
B. the Representative Unit of Visa’s BOD at all
levels shall coordinate with the Lender to carry out
regular and irregular supervision mission, at least
once a year.
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16. Poor Households are not eligible to borrow from
VBSP.
16.1 Poor Households do not have labor capacity,
single owner in the period of court case execution
of
Poor
Households
being
certified
by
local
government to be out of borrowing list because of
social evils such as gambling, drug, stealing, and
laziness.
16.2 Poor household belonging to social
groups: single old persons, incapability,
poverty dependant on State budget grant.
policy
hunger
17. Rights and Obligations of parties involved:
17.1 For Poor borrowing households:
a. Having rights to repay before due and refuse
Lender’s requests which contrast to regulation of
this document.
b. Having obligation to repay (principal, interest)
in full, on time and has to list in full, honestly
all related information regarding the borrowing and
responsible for accuracy of provided information,
full fit all commitments as written in loan
application.
17.2 For the Lender
a. Having rights to refuse borrowing demand of Poor
Households which contrast to regulations of this
document and request Poor household to pay before
due in case of discovery any wrong use of loan by
borrower
b.
Having
responsibility
to
keep
all
documents as stipulated in this document.
credit
18. This document shall be effective from signing
date, replacing all documents issued by The Bank for
the Poor on lending to Poor Household. Any
amendments or supplements of this document shall be
decided by General Director of VBSP.
General Director
15
Vietnam Bank for Social Policies
Ha Thi Hanh
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