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The Central People's Credit Fund needs to take the lead in establishing and putting into operation an internal payment system to serve the implementation of internal payment services within the system, creating favorable conditions for capital regulation from the People's Credit Fund with excess capital to the People's Credit Fund with shortage of capital nationwide; to overcome the situation of unsafe and delayed payment and cash transportation of the People's Credit Funds.
♦ Fourth, improve the ability to serve and support CSQTDNDs : Each CSQTDNDs is an independent, autonomous, self-managed economic organization, responsible for its performance, but is small in scale, with limited operating areas in a narrow area and limited staff qualifications. Therefore, in order to survive and develop, CSQTDNDs need to benefit from services to improve operational efficiency such as consulting, professional training, building business plans and strategies, exchanging and providing information, conducting market research to understand customer needs to create new banking products and services... With limited capabilities in many aspects, each CSQTDNDs itself cannot perform these services.
As the focal agency with nationwide scope of operations, the Central People's Credit Fund needs to proactively establish an organizational network and service mechanism, care and support to improve the operational efficiency of the CSPCs. On the other hand, the Central People's Credit Fund needs to be given autonomy in carrying out business activities to enhance financial capacity and diversify professional activities, meeting the need for better support for the operations of CSPCs.
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♦ Fifth, strengthen co-financing lending activities between the Central People's Credit Fund and the People's Credit Funds : As analyzed above, the operating capital of each Central People's Credit Fund is often limited, while the demand for loans from customers is very large. Moreover, to ensure operational safety, the People's Credit Fund can only meet
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loans within a certain limit. When large loan projects exceeding the ability of the People's Credit Fund are rejected, customers will seek other credit institutions and thus the People's Credit Fund will lose customers. To solve this problem, the Central People's Credit Fund must establish a co-financing lending mechanism with the People's Credit Fund. Regarding the implementation process, the People's Credit Fund is the place to receive loan applications. When it is determined that the ability and regulations on ensuring operational safety do not allow financing the entire loan project of the customer, the People's Credit Fund will transfer the entire loan application to the Central People's Credit Fund. After evaluating the application, the Central People's Credit Fund will decide on co-financing loans with the People's Credit Fund.
Co-financing lending activities are extremely important in the operation of the People's Credit Fund. It ensures the ability to meet customer needs, enhances competitiveness with other credit institutions, and strengthens the linkage in the business activities of the People's Credit Fund system.
♦ Sixth, proactively promote the search for capital sources in the domestic and foreign financial markets to supply to the CSNDs : The demand for capital for production and business in the agricultural and rural areas is very large; while the ability to mobilize local capital sources of the CSNDs is still limited. With the advantage of a credit institution operating nationwide, the Central People's Credit Fund has the opportunity to contact many domestic and foreign financial institutions. In the past, a number of international organizations, governmental and non-governmental organizations have sought out the PCD system to provide capital for this system. However, due to being passive and not really interested in exploiting the advantages of the cooperative credit institution type, the PCD system has not been able to take advantage of preferential loan sources.
To do this, the Central People's Credit Fund needs to proactively strengthen foreign affairs activities, actively participate in movements and forums on microfinance to expand relationships and attract support from international organizations, domestic and foreign governmental and non-governmental organizations. This is one of the
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Practical solutions to improve the efficiency and quickly complete the operations of the Central Military Commission in particular and the Military Commission system in general.
b- Solution implementation roadmap
Solutions to improve the operation of the Central People's Army must be implemented simultaneously with solutions to improve the operation of the grassroots People's Army. Therefore, these solutions need to be implemented in the period from 2010 to 2015.
c- Organization of solution implementation
- For the State Bank: Focus on directing the development of the Project to complete and improve the operational efficiency of the Central People's Credit Fund. In addition, the State Bank needs to review the regulations on the operations of the Central People's Credit Fund to amend and supplement them appropriately and create favorable conditions for the implementation of the above solutions.
- For the People's Army of Vietnam: Thoroughly grasp and actively support the implementation of solutions to improve the operations of the Central People's Army.
- For the Central People's Army: Urgently and actively develop and implement the Project to perfect the operations of the Central People's Army.
- For the Association: Direct and support the Central People's Army to implement the Project to improve the activities of the Central People's Army.
3.4.3.3- For the Vietnam People's Army Association
As the “locomotive” of the QTDND system, the Association’s activities have a great influence on the entire QTDND system. On that basis, solutions to improve the Association’s activities need to focus on the following contents:
a- Contents of the solution
♦ Firstly, giving the Association the initiative in building development orientations, internal management regulations, professional ethics rules and operating standards applied uniformly in the QTDND system : The Charter of the Vietnam QTDND Association is built on the basis of applying Decree No. 88/2003/ND-CP dated July 30, 2003 of the Government.
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The Government regulates the organization, operation and management of associations. This Decree was issued based on Decree No. 102/SL/L004 dated May 20, 1957 promulgating the Law regulating the right to establish associations. Therefore, the Charter of the Vietnam People's Armed Forces Association has many shortcomings and does not meet practical requirements; in which, the provisions on the rights and responsibilities of the Association are not complete.
In most countries, the Association is responsible for developing development orientations, internal management regulations, operating standards and professional ethics applicable to the QTDND system. This is completely consistent with the position and function of the Association and creates conditions for the QTDND system to be autonomous and responsible for its operations. Meanwhile, in our country, these tasks are assigned to the State management agency, specifically in this case the State Bank.
In the context of the banking industry integrating more and more deeply into the international community, amending and supplementing relevant regulations to conform to international practices and practical conditions is an urgent requirement. Therefore, it is necessary to supplement regulations in the direction of giving the Association the initiative in formulating development orientations, internal management regulations, professional ethics and operating standards applied uniformly in the QTDND system.
♦ Second, the Association needs to strengthen the promotion and brand enhancement of the QTDND system : After more than 16 years of operation, the QTDND system has achieved many remarkable results. However, the awareness of state agencies, organizations and individuals about the QTDND system is still very limited. One of the fundamental reasons for this situation is that the QTDND system has not paid attention to the promotion and brand enhancement. Meanwhile, the brand is one of the extremely important factors contributing to
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part of the success of the QTDND system.
During the pilot and consolidation and rectification phase, the propaganda work on the QTDND system is entirely carried out by the State Bank and mainly focuses on raising people's awareness of the policy of establishing QTDND. Entering the completion and development phase, the Association needs to strengthen the promotion work, enhance the reputation and brand of the QTDND system. Only then can the QTDND system attract more customers, and at the same time gain support from domestic and foreign organizations and individuals.
♦ Third, design products and services suitable to the characteristics of CS QTDND : Due to limitations in capacity, qualifications and economic conditions, each CS QTDND does not have the conditions to design products and services suitable to its customer base. Therefore, the Association needs to proactively conduct market research and design products and services to create conditions for CS QTDND to increasingly better meet the needs of customers. This is one of the effective solutions to help CS QTDND attract more customers in the context of increasing competitive pressure from other credit institutions operating in the same area.
♦ Fourth, strengthen consulting activities and technical support for CS QTDNDs : Due to limitations in management capacity and professional qualifications, CS QTDNDs often encounter difficulties in the process of operation. To solve this problem, the Association needs to promote consulting activities and technical support for CS QTDNDs through establishing a hotline to answer questions about policies and regimes related to CS QTDNDs and sending experts to CS QTDNDs to guide and resolve problems in operations upon request. This solution will contribute to strengthening the close relationship between CS QTDNDs and the Association; at the same time, enhancing the position of the Association.
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♦ Fifth, expanding foreign relations to take advantage of technical support projects from organizations and individuals for the QTDND system : In the process of building the QTDND system, the State Bank has implemented a number of technical support projects sponsored by foreign organizations. These projects have actively contributed to helping the State Bank design organizational models, build mechanisms and regulations on operations for the QTDND system. As a State management agency, the State Bank can only carry out this work during the transitional period, when the Coordinating Agency (Association) has not been established.
Therefore, it is time for the Association to proactively establish and expand foreign relations; participate in international forums and seminars on microfinance and become a member of international organizations in the field of People's Credit Unions such as: Asian Confederation of Credit Unions (ACCU), World Council of Credit Unions (WOCCU), etc. This is a solution of special importance in the context of our country's increasingly deep integration into the world economy and the People's Credit Union system is recognized as an inseparable part of the banking industry in particular and the national economy in general.
b- Solution implementation roadmap
The first solution should be implemented as soon as possible. The remaining solutions should be implemented regularly depending on the actual situation and conditions of the QTDND system (possibly from 2010-2015).
c- Organization of solution implementation
- For the State Bank: Direct the Association to research, develop and submit to the Ministry of Home Affairs for approval the amendment and supplementation of the Charter of the Vietnam People's Credit Association in the direction of giving the Association the initiative in developing development orientations, internal management regulations, professional ethics rules and operating standards applied uniformly in the People's Credit Association system.
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- For the Association: Actively research, develop, and submit to the State Bank and the Ministry of Home Affairs for approval to amend and supplement the Charter of the Vietnam People's Credit Association in the above direction; at the same time, proactively implement proposed solutions.
- For the CS QTDND: It is necessary to thoroughly understand and actively support the Association in implementing the above solutions.
3.5- SOME RECOMMENDATIONS
To facilitate the implementation of solutions to improve the organization and operation of the QTDND system as presented above, the author would like to propose some recommendations as follows:
3.5.1- Recommendations to the Party and State:
♦ Firstly, thoroughly grasp the awareness of the role of the People's Credit Fund system in the socio-economic development strategy: In Directive No. 57-CT/TW dated October 10, 2000 of the Politburo on consolidating, perfecting and developing the People's Credit Fund system, the construction and development of the People's Credit Fund was identified as "one of the important solutions to contribute to meeting the capital needs for socio-economic development in agricultural and rural areas ". After nearly 9 years of implementing Directive No. 57-CT/TW, the People's Credit Fund system has basically overcome its limitations and weaknesses and has increasingly developed in terms of scale, quantity and quality. However, awareness of the policy of consolidating, perfecting and developing the People's Credit Fund system at some Party committees and authorities from the central to local levels has not been thoroughly grasped on a regular basis. Therefore, some ministries and branches have not done a good job in building and promulgating mechanisms and policies to facilitate the completion and development of the QTDND system. In addition, Party committees and authorities in some localities have not performed their roles well, and in some places have even intervened too deeply or loosened management of the QTDND's activities.
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On the other hand, after 9 years of implementing Directive No. 57-CT/TW, the context of the economy in general and the situation of the People's Credit Fund system in particular have changed a lot. Therefore, it is recommended that the Politburo issue a document directing Party committees at all levels from the Central to local levels to thoroughly understand the role of the People's Credit Fund system in the socio-economic development strategy; pay attention to and direct relevant agencies to implement assigned tasks to create conditions for the process of perfecting and developing the People's Credit Fund system in accordance with the new situation.
♦ Second, applying preferential tax policies to QTDNDs : Because their main purpose is to support and develop the community, in most countries, QTDNDs are always given special preferential treatment by the State in terms of tax obligations. For example, in Canada, the State applies a tax exemption policy to the Desjardins QTD system for 70 years (from 1900 to 1972). Currently, in Canada and the Federal Republic of Germany, cooperative banks only have to pay 50% of the tax rate compared to other types of credit institutions.
Meanwhile, the People's Credit Funds in our country are only exempted from taxes for the first 3 years after operation; after that, they are subject to the same tax rate as other types of commercial credit institutions. This tax policy is not only inconsistent with international practice, but also does not reflect a reasonable preferential policy for People's Credit Funds and does not encourage people to contribute capital to People's Credit Funds.
To facilitate the QTDNDs to improve their financial capacity and attract members, it is proposed that the Government assign the Ministry of Finance to study and submit to the National Assembly for consideration and amendment of the tax rate applicable to QTDNDs by 50% compared to other types of credit institutions.
♦ Third, perfecting the legal framework regulating the People's Credit Fund system : Currently, the Vietnamese People's Credit Fund system is subject to two laws: (i) the Law on Cooperatives regulating the organization; (ii) the Law on Credit Institutions regulating the operation.