General Assessment of the Current Status of Credit Policy Implementation for Students at Vietnam Bank for Social Policies

In addition, debt extension and debt term adjustment for loans of students in difficult circumstances are carried out for many reasons that are not in accordance with general regulations such as:

+ According to regulations, borrowers must repay the principal and interest of the first loan no later than 12 months from the date the student finishes the course, the loan amount is divided into installments of up to 6 months at a time, but many students have not yet graduated and do not have a job, so they do not have income to repay the bank. Meanwhile, many poor households - the subjects committed to repaying the debt on behalf of students, are accessing credit capital for the first time, so when borrowing, they do not determine the correct repayment period to the bank, leading to a situation where the repayment period is due but the production and business period has not ended or the products have not been sold, so there is no source to repay the debt and must request a debt extension.

+ Due to the characteristics of poor households, most of them lack knowledge about production and business, all activities depend heavily on natural conditions, so when natural disasters, floods, epidemics, etc. occur or business is not favorable, it will lead to loss of capital or losses, people do not have money to pay debts when due and have to ask for debt extension.

+ In addition, some borrowers have a mentality of relying on the Government's preferential capital, so although they are able to repay their debts, they still ask for a debt extension to extend the preferential loan period, and because bank staff do not check carefully, they are still approved.

The above reasons have led to many overdue debts but the debt was extended so that the debt was still recorded as within the term. Some other cases, due to the untimely transfer of overdue debts, have caused the overdue debt ratio to be incorrect. Thus, the actual overdue debt ratio may be much higher than reported, which shows that the potential risk of losing capital of the Social Policy Bank is quite high.

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2.3. General assessment of the current implementation of credit policies for students at the Vietnam Bank for Social Policies

2.3.1. Results achieved

After more than ten years of implementing CSTD for students, the People's Credit Fund has achieved important results:

Preferential credit for students in difficult circumstances has helped students not drop out of school due to lack of money, and has supported poor people to have the opportunity to improve their lives.

With specialized magazines, columns, and separate programs introducing the VBSP and preferential credit capital for students, popularized on mass media channels, local newspapers and radio stations, and integrated programs through socio-political organizations, the VBSP is becoming increasingly closer to the poor, and the VBSP is increasingly becoming a trusted address for the poor when they need capital.

To date, more than 3.3 million students in difficult circumstances have been able to borrow money to study. Decision No. 157/2007/QD-TTg was issued promptly, in accordance with the people's wishes, contributing to creating equality in education in society.

The Ministries of Finance, Planning and Investment, State Bank of Vietnam, Education and Training, Labor - Invalids and Social Affairs have paid great attention to coordinating the implementation, especially the Ministry of Finance and the State Bank of Vietnam have promptly arranged capital sources for loans to students in the first days of implementation and throughout the policy implementation process.

The network of activities of the VBSP is organized to reach the commune level through 203,538 Savings and Credit Groups located in hamlets, villages, and hamlets, with nearly 11,000 transaction points at the commune level of the VBSP, which has promptly grasped the subjects and loan needs at the grassroots level. The organization of loan disbursement at the commune level, along with the method of partial entrustment through socio-political organizations, is an important factor, contributing to accelerating the progress of lending to students.

2.3.2. Limitations

During its operation, besides the achievements, the student lending activities of the Social Policy Bank have not developed compared to the potential of the Bank's operations and practical requirements. This is shown in the following points:

Firstly, the credit scale is not commensurate with the needs and number of customers.

Borrowers. According to the results of the activities, the number of students who are eligible for loans has increased quite rapidly. However, if we compare this number with the number of students who are eligible for loans from all schools in the country, this number is still low. According to the opinions of schools that regularly contact the Social Policy Bank, there are about 30% - 40% of students who are eligible for loans but have not been able to borrow. This is one of the limitations that needs to be considered.

Second, the number of customers is not large and not uniform among regions. Although the credit program has been implemented since 1998 and the Government has made decisions to supplement and change investment policies, the credit volume and the number of students borrowing capital are not large and are only concentrated in some provinces and cities in the North Central region such as Thanh Hoa, Nghe An, Ha Tinh, etc. The number of students borrowing capital in some provinces in remote, mountainous areas such as the Northwest and Central Highlands is still low.

Third, the overdue debt ratio has not yet properly reflected the overdue debts, and some students have not used the loan for the right purpose.

CSTD activities always have many potential risks, but up to now, the mechanism for debt settlement and risk handling for the student loan program has not been specific. Only short-term capital sources can be mobilized, but banks have to lend without collateral and without the participation of equity capital in the production activities of borrowers, so when risks occur to borrowers, the possibility of losing capital for the bank is very high. Therefore, capital recovery to continue lending is very difficult and greatly affects the total capital as well as the payment capacity of the bank.

Fourth, credit quality is not good in some places and at some times. In many places, there is still embezzlement, corruption, and capital distribution in the form of sharing and dividing equally. The work of collecting overdue debts, especially debts that have been delayed since before the handover, is still confusing.

2.3.3. Causes of limitations

a) Subjective causes

Firstly, the lending policy is not suitable to practical conditions.

It can be seen that the credit for students in difficult circumstances of the Vietnam Bank for Social Policies is still spread out and equalized. Although the average loan amount has increased over the years, it is too small compared to the maximum loan amount allowed. Therefore, students are allowed to borrow capital at a limited level, leading to many cases where students do not borrow enough capital to cover their study and living expenses at school.

Low interest rate and preferential policies for students can only support for a limited period of time. In cases where the Bank is able to mobilize capital at low interest rates at any time when capital is needed, lending at preferential interest rates is possible. However, the Social Policy Bank only uses 20% of the State capital in the initial stage of operation and for sustainable development, the bank needs to mobilize capital mainly from the people at market interest rates. In this case, the lending interest rate can hardly be maintained at the preferential interest rate.

Second, lending work still has many shortcomings.

Because the implementation of the credit policy for students in difficult circumstances according to Decision 157/2007/QD-TTg is carried out on a large scale (in all regions of the country), the credit volume and the number of students borrowing capital are large, the Social Policy Bank cannot avoid confusion and difficulties, especially in the stage of having to coordinate with many functional agencies for implementation such as: Ministry of Finance, Ministry of Education and Training, Ministry of Labor - Invalids and Social Affairs, the stage of guiding procedures and business processes for borrowers, especially debt monitoring.

Currently, the People's Credit Fund has not yet developed a system of internal credit quality assessment and rating criteria, therefore, there is not enough information to analyze the credit situation in order to propose appropriate measures to improve quality.

Third, the staff implementing loans is lacking in quantity and quality.

The amount of capital is large, the number of policy beneficiaries is large, the number of bank staff is limited, and the disbursement progress sometimes does not meet requirements.

The Social Policy Bank currently has transaction offices at 63 provincial branches and more than 600 district-level transaction offices. According to the requirements of developing loans for students in difficult circumstances, the Social Policy Bank must expand its branch system to the grassroots level, especially in remote, mountainous and island districts where there are many potential customers of the bank. However, at present, each transaction office has 5-7 officers working on lending for the entire district, each officer is responsible for lending to 5-7 communes. On the other hand, the bank's staff has uneven qualifications, partly due to being concentrated from many different departments (received from the Bank for Agriculture and Rural Development, from other agencies and newly recruited).

Due to the nature of the lending work of the VBSP, there are difficulties in terms of income and working means. These are not only obstacles for the bank but also real challenges for each officer and employee of the bank, requiring officers to have the qualities of dedication and passion for the poor. In many localities, the facilities are lacking, sometimes even the necessary means for professional work are lacking, officers have to use manual methods, which takes a lot of time and work efficiency is not high.

With a large number of employees distributed over a large area, the bank's Training Center has just been established, so the organization of training and knowledge development for employees is not regular and continuous. This also affects the quality of the staff as well as the effectiveness of the projects.

Fourth, the coordination between the People's Credit Fund and socio-political organizations and schools in loan management and the shared responsibility of members of the savings and credit groups is not high.

The development and signing of documents and trust contracts between the Social Policy Bank and socio-political organizations and savings and credit groups have not clearly defined the material responsibilities of the participating parties, which is also the reason affecting the lending efficiency of the Program.

The joint responsibility between members of the Savings and Credit Group plays an important role in the credit activities for students of the Social Policy Bank. Because credit activities for students are high-risk because the loans are not secured by assets, based on trust and the joint responsibility between members in the group. However, the regulation on joint responsibility in borrowing and repaying bank loans is currently only a general regulation. In many cases, borrowers cannot repay their debts or are slow to repay, but other members continue to borrow capital. That affects the lending efficiency of the Social Policy Bank.

Fifth, capital sources have not met the long-term needs for developing student lending activities.

The Social Policy Bank has not yet developed a stable and long-term capital strategy. This is a credit program with a large credit volume (from 30 to 35 trillion VND) with a long loan term, an average of 5 years of study without revolving debt collection, one year after graduation and starting from the 7th year onwards, the first principal and interest will be collected (except for vocational students with short-term study time). Therefore, it is necessary to arrange a long-term and stable capital source to invest in this program. The recent loan implementation shows that the capital arrangement is very passive (advancement from the State Treasury is recorded annually), so the capital term is unstable and unclear, causing difficulties in the implementation process.

Sixth, the work of information, propaganda and dissemination of policies is still limited. Organizations carry out entrusted lending at some branches of the People's Credit Fund at the provincial level.

The district has not received close attention, the propaganda and dissemination of policies and guidelines for lending to students are still limited and not deep, especially the propaganda to members of the Savings and Credit Group about the policy of not entrusting principal debt collection to socio-political organizations, leaders of the Savings and Credit Group, therefore, borrowers

Still used to the old habit of paying principal to socio-political organizations, heads of savings and credit groups, creating opportunities for some subjects to embezzle and misappropriate capital.

b) Objective reasons

Firstly, on the customer side: Some households do not yet have information about the policy and do not dare to borrow money because they are worried about repaying the debt. Some households with 2 to 3 students borrowing money also have many concerns and worries about their ability to repay the debt and interest after their children graduate. The number of students with difficult circumstances studying vocational training for less than 1 year and students in mountainous districts, remote areas borrowing money is still low. Mostly, families with difficult circumstances borrow money for their children to study at universities and colleges, the number of families borrowing money for their children to study at high schools and vocational schools, especially short-term vocational schools is not much.

A number of students who cannot find a job or have low income after graduation find it very difficult to repay the principal and interest every month. Especially for families with financial difficulties and no other source of support, they are even less able to repay the loan on time (especially disadvantaged and orphaned). Some students still consider the loan from the fund as a grant, so when graduating, they do not have the awareness to repay the bank.

Second, regarding policy mechanisms: The program's Decisions before Decision No. 157/2007/QD-TTg of the Prime Minister stipulate lending methods, debt collection methods, and interest collection methods different from Decision 157/2007/QD-TTg, causing misunderstandings and difficulties in the management and monitoring process for borrowers and banks.

Although the financial regime of the VBSP has been supplemented and adjusted many times, it is not stable, does not create initiative for the VBSP and does not really stimulate the staff to stick with their work.

In addition, the financial allocation mechanism of the People's Credit Fund is based on Circular No. 24/2005/TT-BTC of the Ministry of Finance, implementing financial allocation based on credit balance, which will encourage units in the system.

The People's Credit Fund focuses more on disbursement than debt collection, and interest collection also has a significant impact on credit quality.

The provisioning mechanism of the Social Policy Bank (general provisioning of 2% on average outstanding debt) is different from other commercial banks according to Decision 493/2005/QD-NHNN and Decision 18/2007/QD-NHNN of the Governor of the State Bank.

Third, regarding the socio-economic environment: Although the method of partial entrustment through socio-political organizations is much more effective than the previous method of full entrustment through the Vietnam Bank for Agriculture and Rural Development, this method also reveals some limitations that affect the quality of student credit. The organization staff often have little knowledge about the financial and banking fields.

Due to the long loan period and the small loan amount received in each period, it is difficult for the Group Leader to manage and monitor the entire loan period of the household. Furthermore, during the loan disbursement period, the borrower does not have to pay interest, causing the Group Leader to not want to admit or approve loans for family associations that need loans for their children to go to school, because if there is no interest, the Group Leader will not receive the commission paid by the Bank (including the trust fee that the association receives).

Fourth, regarding the legal environment: The awareness of Party committees and local authorities in remote areas is still limited. They have not carefully studied documents to provide guidance and close direction, so in some places, the process of reviewing and confirming loans is not yet appropriate for the right subjects.

Students in difficult circumstances who borrow capital from the Vietnam Bank for Social Policies are policy subjects regulated by the State according to the classification criteria prescribed by the central or local State and investigated and recognized by the commune level. However, the list of poor households, near-poor households, and households in difficult circumstances used for loan approval is not realistic, creating loopholes in

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