Preferential loans helping low-income families

A credit policy that allows families who have just escaped from poverty within the last three years to receive preferential loans is proving effective in localities nationwide.

Under the Prime Minister's decision 28/2015/QD-TTg that took effect last September, families that just escaped poverty are eligible to borrow a maximum amount of 50 million VND (2,250 USD) from the Vietnam Bank for Social Policy (VBSP) with a yearly preferential interest rate of 8.25 percent for five years to develop production and business.

The credit programme creates favourable conditions for the borrowers, due to its simple borrowing procedures.

The head of the bank branch in the Central Highland province of Gia Lai, Le Van Chi, said that in the last four months, the bank offered loans of 90 billion VND (4 million USD) to 2,300 borrowers eligible for decision 28.

Photo for illustration. Source: ilssa.org.vn

He said that the funding was very helpful and meaningful to low-income families because without money to develop farming or business, they would return to poverty again and even poorer due to debts.

In central Ha Tinh province, the VBSP offered loans of 49 billion VND (2.2 million USD) to 1,600 families hovering near the poverty line.

In the period 2011 to 2015, the country's poverty line is 400,000 VND (17.9 USD) per person per month in rural areas and 500,000 VND (22.4 USD) per person per month in urban areas.

However, the Ministry of Labour, Invalids and Social Affairs (MoLISA) will replace the single-dimensional approach to poverty with the multidimensional measurement method for the 2016–2020 period as it announced late 2015.

The new multi-dimensional measurement, taking effect from January 1, 2016, will not only be based on people's income but also on under-privileged people's access to the necessities of life such as healthcare, education, housing and so on.

Vice head of the Women Association of Ha Tinh province’s Xuan Hoi Commune, Bui Thi Hai, said that hundreds of families there earned their living by small-scale fishing and they were vulnerable to become poor if facing shocks like bad weather or damage to fishing boats.

Local fisherman Nguyen Dinh Van said that previously, his family could only afford to buy a small boat with capacity of 15 CV for inshore fishing.

"My boat was too old and partly broken. I could not borrow a loan at the normal market interest rate," he said.

"I have borrowed 30 million VND (1,300 USD) from the bank of social policies thanks to Decision 28," he said, adding that he used the loan to fix the boat and buy more fishing tools.

The implementation of Decision 28 also brought positive results in other localities, chinhphu.vn reported.

In 2015, more than 750 families in southernmost Ca Mau province got preferential loans worth more than 17 billion VND (756,500 USD).

Almost 1,500 families in southern Tien Giang province received loans worth 45 billion VND (2 million USD).

The Bank for Social Policies in northern Bac Ninh province offered 64.2 billion VND (2.9 million USD) to those who have escaped poverty and want to develop production and business.

According to the VBSP's statistics, of roughly 700,000 households having just escaped from poverty nationwide, 500,000 have not yet repaid loans taken under credit programs for poor and near-poor households. Hence, the new policy, in the immediate future, will benefit around 200,000 households who have never borrowed capital from, or have repaid all their debts to the VBSP.