This was the topic of a recent seminar held by the State Bank of Vietnam (SBV) and the Asian Development Bank (ADB) in Bac Ninh province. The event was attended by consultants, bank supervisors and inspectors, representatives of the SBV, the Ministry of Finance, the Ministry of Planning and Investment, the Vietnam Women’s Union, the Vietnam Bank of Social Policies (VBSP), the People's Credit Fund and microfinance institutions.
To support the Government of Vietnam's efforts to develop a dynamic and effective microfinance sector in the context that microfinance is being gradually legalised and operated as a mainstream financial operation channel, the ADB has assisted the Government of Vietnam with credit support programmes, non-refundable grants and policy recommendations. Needless to say, the ADB is a leading donor and partner of Vietnam in terms of microfinance.
To further improve support contents, ADB, through the Japan Fund for Poverty Reduction (JFPR) of the Japanese Government, decided to grant US$1 million of non-refundable grant to the Government of Vietnam to carry out the Project 8391-VIE “Strengthening Microfinance Sector Operations and Supervision.” The project is scheduled to be implemented in four years, starting from January 2014. The SBV, authorised by the Government of Vietnam, has received the project for develop strong microfinance operations to provide qualified, suitable financial services for people with moderate and low incomes.
To achieve the main objective of strengthening microfinance sector operations and supervision in Vietnam, the technical assistance project will focus on implementing the following activities: training staffs of Vietnamese State management agencies and microfinance supervising agencies like the SBV, the Ministry of Finance and the Ministry of Planning and Investment; training microfinance institutions, social policy banks, cooperative banks, people’s credit funds of best microfinance operations practice and supervision and management standards. In addition, the project will support the development of formal microfinance networks, organise activities to encourage microfinance supervisors and practitioners to share knowledge about microfinance in the world.
As of 2013, microfinance operations in Vietnam are carried out by banks, including VBSP, the SBV, the People's Credit Fund and microfinance institutions. Therefore, this project will carry out four major tasks: Training provided for microfinance institutions, cooperative banks, people's credit funds and social policy banks; training provided to the SBV, the Ministry of Finance and the Ministry of Planning and Investment; the establishment of a formal microfinance network; and opportunities for supervisors and microfinance practitioners to share knowledge of international best practices.
At the same time, the project will also build a legal framework for micro-insurance, expected to be deployed in 2015. Accordingly, insurance companies will be the vendor of simple products at low prices, which are affordable for low-income people.
Dr Ha Huy Tuan, Vice Chairman of the National Financial Supervisory Commission (NFSC), used to note that enhancing the capacity of macro-finance supervision in Vietnam is necessary to avert the risks of this system.
In fact, the financial supervision system only focuses on micro-safety supervision based on compliance supervision rather than risk-based supervision. Meanwhile, the financial market is developing rapidly and complicatedly in both size and structure, with intertwined financial activities amongst banking, securities and insurance areas and in a volatile macroeconomic environment. The inspection and supervision of financial market is done as chosen by regulatory agencies. This may pose risks to many aspects. In reality, not to include the fact that policies per se that financial institutions follow do not create positive effects. Even, other risks may arise from internal elements of financial institutions or from the economy. These aspects have not yet been considered in financial management and oversight.
Tuan said, to improve the macro-safety oversight capability, market disciplines must be observed first in order to minimise unnecessary administrative costs of macro-safety monitoring. It is necessary to make good preparations of knowledge and understanding of economic conditions and financial markets for officials of macro-safety supervisory agencies. Cross-border cooperation with foreign supervisory authorities in the macro-safety supervision should be formally established and strengthened in the future.
In the medium and long term, Vietnam needs a comprehensive assessment on the status and the ability to deploy macro-safety supervision in order to build a legal framework for this operation as well as develop a real, effective coordination mechanism for agencies in the financial safety network to conform to international practices and practical conditions of Vietnam, he added.
Nguyen Dung
Vietnamese
