Sustainable microfinance in Vietnam
In 1998 the General Assembly of the United Nations proclaimed 2005 as the International Year of Microcredit. The objective is to provide an occasion to raise awareness of the importance of microcredit and microfinance in the eradication of poverty, to share good practices and to further enhance financial sector development that supports sustainable pro-poor services in all countries.
Microcredit and microfinance programs go beyond the individual household level to help strengthen the fabric of local economies by investing in the productive capacity of communities, stimulating consumer activity and creating new jobs.
Australian assistance for a Vietnamese microfinance institution, the Capital Aid Fund for Employment of the Poor (CEP), has enabled it to increase the access of poor people in semi-urban districts of Ho Chi Minh City to financial services, and in the process helped it to establish a reputation as a leader in microfinance in Vietnam.
CEP has exceeded performance targets with a net increase of more than 17,000 clients half way through the five-year $5.5m program. An increase of 15,500 clients was expected for the entire project duration. CEP clients, of which about 80% are women, have limited access to formal credit. The average loan size of US$200 is commonly used to establish or expand microenterprises such as animal husbandry or waste recycling.
CEP’s management information systems enable it to measure the effect of access to financial services on its clients. A mid-term impact assessment undertaken by CEP in 2003 found:
- 34% of clients increased their income over the past 12 months (76% of these commenced or expanded a business enterprise)
- 55% of clients spent their increased income on food and other basic needs, while 44% made additional expenditures on children's education.