On 21/7/2014, in Hanoi, under the chairmanship of the World Bank (WB) and the State Bank of Vietnam, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) that is the head bank for implementing the Rural Finance Project III held the assessment Meeting finishing the Rural Finance Project in order to summarize the achievements as well as practical experiences in the implementation of this project. This is a chance to look back on the whole implementation process of Rural Finance Project funded by WB to Vietnam for the first time since 1996.

Attending the Meeting were the Deputy Prime Minister Hoang Trung Hai, Governor of the State Bank of Vietnam Nguyen Van Binh, Country Manager of the World Bank in Vietnam Mrs. Victoria Kwakwa and many representatives of relevant ministries, departments, representatives of 30 financial institutions participating in the project.

​Vietnam is assessed to be the most successful country in the implementation of Rural Finance Project model in the world. Before the Rural Finance Project II is finished, the WB decided to permit Vietnam continuing to implement the Rural Finance Project III “This is an unprecedented precedent for the projects of WB,” a WB official stressed at the meeting summarizing the implementation of the previous Rural Finance Project II.

The Rural Finance Project III is in the chain of 3 Rural Finance Projects with total value of USD 548 million, in which the Rural Finance Project III is USD 200 million funded by the World Bank (WB), the State Bank is the governing body and BIDV is the wholesale bank. The capital sources of the project are to implement the national target programs of Vietnam such as New Rural Construction, Hunger Elimination and Poverty Reduction, and support for the implementation of the Programs with target to create jobs and increase income for the poor, especially the rural poor. The project also contributes to implementing the Project for restructuring the credit institutions System of the Government.

The Rural Finance Project III was implemented from 2009 in the model of “Wholesale bank”, through a commercial bank BIDV as the head bank, and the State Bank as the governing body, with the positive and effective participation of 30 financial institutions, 21 commercial banks and 9 People's credit Funds.

The most important success of the project is achieving all development goals agreed between the Government of Vietnam and the World Bank;

-          As of 31/12/2013, the entire credit  USD 200 million of WB was disbursed completely to contribute to increasing the supply of medium-term and long-term capital sources for investment in rural economic development, hunger elimination and poverty reduction, job creation, increase of income for farmers and rural enterprises, contributing the important part in the agricultural, rural economic structure shift of Vietnam, effectively supporting the hunger elimination and poverty reduction programs of the Vietnamese government. Over 5 years of Project implementation, together with the additional capital sources from the financial institutions and contributions of the end borrowers when participating in the project, the project capital sources created the gross investment in the rural area up to USD 487 million (equivalent to VND 9,800 billion), of which about 90% is the medium and long term investment. Thus, it is estimated that each dong of loan from the World Bank created 2.62 investment dong in the rural economy. More than 135,000 residents and enterprises in the rural areas, in which more than 70,000 poor households have access to the capital source of the project. The Rural Finance Project III has created over 140,000 new jobs in rural areas. The average investment of about VND 65 million creates a new job, it shows that the capital source of the project invested in the market segment has a high job creation coefficient.

-          With the more expansion design in the participants in addition to the commercial banks, there are also the grassroots People's Credit Funds. Through that to improve a step of approach to capital of a large number of farmer classes in the remote areas, ethnic minority compatriots and help for many borrowers who are women for sustainable poverty riddance.

Within the framework of the Rural Finance Project III, over 500 training courses with nearly 17,700 financial institution cadres, 09 large international consultancy packages contribute the important part to helping the participating parties to strengthen their capacity and operate effectively;

Support the Inspection and Supervision Agency of the State Bank to strengthen the supervision functions for the small-scale financial institutions.

The average overdue debt rate from the end borrowers to the disbursement banks is very low, only 0.40%. Especially, 51% of small loans of the Project is granted to the borrowers who are women.

-          Enhance the institutional capacity for the financial institutions and Associations. Along with that, the Project is also managed and implemented in strict compliance with the regulations of the World Bank and the Vietnamese Government on management and implementation of ODA Project, it has brought about an opportunity to enhance a step of institutional capacity for the financial institutions, Small and Medium-sized Enterprise Association, and the People's Credit Fund to optimize the accessibility to financial services of the Vietnamese Small and Medium-sized Enterprises, maintain sustainability in operation of the People's Credit Funds to serve the rural people better and better.

-          Besides, the sustainable development factor that is specially focused to attach closely the regulations on environmental protection to the small-scale lending activities in the rural areas has contributed the positive part to improving the people's awareness of environmental protection in the production and business activities. This is also a new advance  in the credit lending in the rural areas that the banks can extend the application to the other ordinary loans.

Speaking at the meeting, Mrs. Victoria Kwa kwa Country Manager of WB in Vietnam said “What we see in this project are that PFIs have contributed their own resources to the project as well as they must manage the project and this increases job for them and assure with them that: these are the profitable and meaningful business activities, so they can do well the agricultural and rural development, hunger elimination and poverty reduction and can earn profits and they can do extremely intelligently and suitably to their business strategy”.

The chain of Rural Finance Projects includes 03 Rural Finance Projects I, II and III that was first implemented in Vietnam since 1996, up to now it has attracted 37 financial institutions including 28 commercial banks (accounting for nearly 70% of total commercial banks in Vietnam) and 9 People's Credit Funds. With a total capital of USD 548 million of the projects, it created the gross investment in the rural areas up to USD 2.1 billion (equivalent to VND 44,000 billion), financing to about 1.7 million of loans, including 0.6 million of loans to the low-income households, poor households, created over 410,000 new jobs, help to improve the living conditions of the people and contribute to the hunger elimination and poverty reduction. The chain of projects also implements the initiative of Mobile bank Vehicles (402 vehicles were purchased by the project capital source) has provided direct services to the poor people in the remote areas where there is no bank branch operating. The capital source of the chain of Rural Finance Projects also funded over 1,600 training courses for more than 50,000 cadres of the financial institutions, and 17 large technical support consultancy packages to help the financial institutions involve in building and implementing the development strategies and human resources development.

The Rural Finance Project III in particular and the chain of Rural Finance Projects in general finished the disbursement capital withdrawal period at the end of 2013, but the capital source will continue to be loaned to 2033, it will create the estimated gross investment of the whole society up to nearly USD 5 billion from the working funds managed by BIDV. Thus, in tens of next years, the benefits of the project will continue to be increased strongly in the economic, social and environmental aspects./. 

For further information, please contact:

Mr. Nguyen Manh Hung -  Operations Center III, BIDV

Tel: 0912.573.387; Email: Hungnm.sgd3@bidv.com.vn

Reference information about the Rural Finance Project III:

According to the Independent Assessment Report on economic and social impact of the Project made by Mekong Economic Consultancy Company in 9/2013, the Rural Finance Project III has a positive impact on the borrowers in the rural areas. Specifically:

-          38% of end borrowers said, through the project, the first time they have access to the banking services;

-          53% of borrowers confirmed that they could not implement the business plan or must reduce the investment if they do not have the loans from the project;

-          76% of borrowers confirmed that  the capacity to borrow the medium and long-term capitals is increased;

-          73% of borrowers confirmed that the loans help create more jobs for the society or increase the working time for family members;

-          94% of borrower confirmed the increase of income of the households and enterprises;

-          75% of borrowers said that their awareness of environmental protection has increased significantly when accessing to the project capital sources;

-          92% of borrowers assessed that they are satisfied and very satisfied when they access to the project capital sources.