Recognized as the Typical Microfinance Institution (MFI) Pro-poor focus under the CMA 2014, Mrs. Duong Thi Hai Yen – the spokesman of Tinh Thuong One-member Limited Liability Microfinance Institution (TYM) has discussed with the Banking Times reporter about current advantages and disadvantages in the microfinance field.
Thanks to the license granted by the State Bank of Vietnam (SBV) to TYM to operate as a limited liability company, how have your microfinance activities been facilitated?
It is confirmed that under the adjusted legal mechanism and the SBV’s constant supervision, activities of MFIs have been increasingly improved towards professionalism and become more effectively.
Besides, their manpower capacities have been enhanced. Their business processes and reporting have also been improved. That has been enabling TYM to improve its products and services such as credit, savings and other non-financial ones to be better tailor to customers.
In particular, the license that allows TYM to operate as a limited liability institution has opened up opportunities for TYM to access to loans as well as mobilize savings from domestic and international organizations and individuals.
TYM and others licensed MFIs have been permitted to manage revenues and expenditures on their own. It is extremely important to have a balance among available resources, capital to meet the needs of members, and operational expansion requirements. After licensed, TYM has become more proactive in finding financial resources that has enabled us to develop more effectively and sustainably.
The lending interest rate of microfinance is generally higher than that of Agribank. How has TYM competed with them?
It is true that the interest rate of the microfinance is higher than that of Agribank. However, the interest rate is only one factor affecting the decision of clients. MFIs have their own advantages and strong points to attract and retain customers.
First of all, we allow borrowers to repay in weekly or monthly installments. That split which helps to reduce the burden of repayment for customers is one of our big advantages. By this way, customers are more easily to repay loans through the gradual accumulation of their daily earned income. This mechanism suits the TYM’s target groups that are women in rural or semi-urban areas with regular income by days/weeks.
Secondly, customer services are easily accessible and convenient. Because, MFIs disburse and collect loans and provide other services at the hometowns of customers. Therefore, it is not necessary for them to travel, especially the ones living in rural areas with unfavorable transportation infrastructure.
Thirdly, we provide comprehensive services: Customers are not only simply provided with capital but also other financial services such as savings, mutual and supplementary services to enhance their knowledge, capacities and customer care. For example, we always organize training courses to build up customers’ knowledge, support them with technical advice and connectivity of their products to market, provide free medical services, scholarships for poor children with excellent learning results, social houses, and support for customers in trouble etc.
With the outstanding features as above, MFIs always receive great support from local leaders and people where they are operating.
Given the difficult operation context of other banks, how have MFIs as TYM been affected?
Microfinance is also part of the national financial system; therefore, it is inevitably affected by objective factors. In recent years, microfinance clients have encounters troubles in finding outlets for their products; their business activities and demands for loans from MFIs including TYM, as a result, have reduced.
However, MFIs as TYM have always strived to offer solutions that support customers to search and expand markets, improve product value, and help them improve business performance. Thanks to that, their loan demand has increased.
In addition, taking the advantage of microfinance that allows customers to get small loans and put small savings into account, our market share has still remained stable. For example, in terms of credit, TYM has a variety of products with different terms, amount and using purposes meeting with the needs of customers. Our lowest level of capital offered to customers is VND 1 million.
In terms of savings, apart from similar products with others banks, TYM also offers the others suitable for the poor, low income groups such as contributed savings, savings from very small amount of VND 5,000. Other services are also designed to make diverse and suitable to customers.
According to you, which legal framework is needed so that microfinance operations become more efficient?
Although the Law of Credit Institutions were issued in 2010 and became effective from 1/1/2011, the bylaws have not been finalized. Some of the provisions applicable to credit institutions have not been adjusted to suit the characteristics of microfinance. All of these have been making difficult for MFIs during their operations. For example, currently there is no circular guiding the licensing under the Law of Credit Institutions, regulations on liquidity ratios, contingency reserves from profit for further development etc.
Thank you very much!
By Duc Nghiem
(According to the Banking Times dated 12/12/2014)