Developing rural financial institutions in Vietnam

Ministry of Education and Training

National Economics University



Le Thanh Tam

develop

Vietnam rural financial institutions

PhD thesis in economics

Hanoi - 2008

Ministry of Education and Training

National Economics University



Le Thanh Tam

develop

Vietnam rural financial institutions

Major: Economics, Finance- Banking Code: 62.31.12.01

PhD thesis in economics

Scientific supervisor: Associate Professor, Dr. Le Duc Lu

Hanoi - 2008

COMMITMENT

I hereby declare that this is my independent scientific research work. The information and data in the thesis are honest and have clear and specific sources. The research results in the thesis are honest and have never been published in any other research work.

PhD student

Le Thanh Tam

INDEX

COMMITMENT

LIST OF ABBREVIATIONS LIST OF TABLES LIST OF FIGURES

INTRODUCTION 1

CHAPTER 1: THEORETICAL BASIS FOR DEVELOPING ACTIVITIES OF RURAL FINANCIAL INSTITUTIONS 13

1.1. OVERVIEW OF RURAL FINANCIAL ORGANIZATIONS 13

1.2. ACTIVITIES OF RURAL FINANCIAL INSTITUTIONS 24

1.3. DEVELOPING ACTIVITIES OF RURAL FINANCIAL INSTITUTIONS 34

1.4. FACTORS AFFECTING THE DEVELOPMENT OF ACTIVITIES OF 45 INDUSTRIES

1.5. INTERNATIONAL EXPERIENCE IN DEVELOPING RURAL FINANCIAL INSTITUTIONS 53

CHAPTER 2: CURRENT STATUS OF DEVELOPMENT ACTIVITIES OF RURAL FINANCIAL INSTITUTIONS IN VIETNAM 59

2.1. OVERVIEW OF VIETNAMESE BUSINESSES 59

2.2. CURRENT STATUS OF DEVELOPMENT OF ACTIVITIES OF VIETNAMESE FINANCE ORGANIZATIONS 69

2.3. ASSESSMENT OF THE CURRENT STATUS OF DEVELOPMENT ACTIVITIES OF VIETNAMESE INDUSTRIES 101

CHAPTER 3: SOLUTIONS TO DEVELOP THE ACTIVITIES OF RURAL FINANCIAL INSTITUTIONS IN VIETNAM 125

3.1. VIEWPOINTS ON DEVELOPING ACTIVITIES OF RURAL FINANCIAL INSTITUTIONS IN VIETNAM 125

3.2. SOLUTIONS TO DEVELOP THE ACTIVITIES OF RURAL FINANCIAL INSTITUTIONS IN VIETNAM 130

3.3. PROPOSAL 162

CONCLUSION 170

List of author's works List of references Appendix

LIST OF ABBREVIATIONS

Acronym

Vietnamese phrases	English phrases
AGRIBANK	Bank for Agriculture and Development rural Vietnam
CEP	Capital Development Support Fund	Capital Aid Fund for Employment of the Poor
DID	Canadian International Development Agency	Desjadin International Development
DTBB	Reserve requirement
FSS	Financial sustainability	Financial self- sustainability
GB	Grameen Bank	Grameen Bank
HLHPN	Women's Union
IFAD	International Fund for Agricultural Development	International Fund for Agricultural Development
DAINTY	Non-governmental organization	Non-governmental Organization
NH	Bank
Social Policy Bank	Social Policy Bank
State Bank of Vietnam	State Bank
NHNo&PTNT	Bank for Agriculture and Development Countryside
Commercial Bank	Commercial Bank
State-owned commercial banks	State commercial bank
OSS	Operational sustainability	Operational self- sustainability

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Acronym

Vietnamese phrases	English phrases
QTDND	People's Credit Fund
QTDNDTW	Central People's Credit Fund
ROA	Return on assets	Return on Assets
ROE	Return on equity	Return on Equity
TCTC	Financial Institution
TCTCNT	Rural financial institutions
TYM	Charity Fund	I love you fund

LIST OF TABLES

Table 1.1. Rural financial service providers 21

Table 1.2. Standards for evaluating the development of activities of TCTCNT 41

Table 1.3. Variables in the OLS model on the relationship between access level and sustainability of TCTCNT 43

Table 1.4. Variables in the factor analysis model 44

Table 2.1 Rural finance providers in Vietnam 61

Table 2.2. Number of households and proportion of household loans of official financial institutions 67 Table 2.3. Outstanding credit of Vietnamese financial institutions, 2001-2007 69

Table 2.4. Mobilizing savings from the population in the period 2001-2007 72

Table 2.5. Number of products of Vietnamese TCTCNT as of December 31, 2007 76

Table 2.6. Outstanding loans and savings of official financial institutions 80

Table 2.7. Comparison of independent variable values in the OLS regression model of Vietnam and Latin American countries 98

Table 2.8: Correlation matrix between variables in factor analysis model 100

Table 3.1. Analysis of the Vietnamese People's Public Security system according to the SWOT model. 148

LIST OF FIGURES

Figure 1.1. The role of TCTCNT in rural socio-economy 23

Figure 1.2. Basic approaches and operations of TCTCNT 25

Figure 1.3. Development process of TCTCNT activities [196] 35

Figure 1.4. Assessment of the development of activities of TCTCNT 37

Figure 2.1. Segmentation of Vietnam's rural financial market 66

Figure 2.2. Rural credit market share by number of customers... 70 Figure 2.3. Rural credit market share by outstanding loans 71

Figure 2.4. Number of household customers of credit institutions 2001-2007 78

Figure 2.5. Average loan/GDP per capita of TCTCNT 83

Figure 2.6. Depth of access of TCTCTN compared to the average level of TCTCNT in the world 84

Figure 2.7. Comparison of bad debt ratio of credit institutions with the system of state-owned commercial banks.. 86 Figure 2.8. Level of self-sustainability in OSS activities of official credit institutions.. 88 Figure 2.9. Level of self-sustainability in FSS finance of official credit institutions 91

Figure 2.10: ROA of official TCTCNT 95

Figure 3.1. Risk Pyramid – An Organizational Perspective 160

Developing rural financial institutions in Vietnam - 1

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