Are the Prospects for Vietnam MFIs really bleak? Some Insights during a Strategic Planning Workshop


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What would you do if there are signs showing that your industry is moving towards sunset?   It was met with mixed feelings by participants to the strategic planning workshop for microfinance institutions.  The Credit Support Fund (CSF), a wholesale lending facility under the Vietnam Women’s Union (VMU) organized a training-workshop on strategic planning as part of its support to capacity-building of microfinance institutions in Vietnam. It was attended by participants from 10 MFOs, where only one has an existing strategic plan, three are in the process of formulating, and the rest has yet to draft their own strategic plans. The training-workshop was aimed at helping microfinance institutions develop strategic thinking and position their institutions for the future.

The strategic planning process is generally divided into four main activities, which includes the following:

  •  Setting the vision and the mission of the institution. This requires defining the reason for being of the institution, the clients they want to reach and the methods on how they can provide their services;
  •  The environmental assessment follows which focuses on the political, social, economic and technological developments that affect the operation of the institution. This part also includes looking at the industry and details on how competitors are doing;
  •  The internal assessment focuses the present capacities and resources of the institution to move forward and the direction that would lead to the attainment of its vision;
  • Identifying the strategic choices and the detailed plan where the objectives and the indicators are identified, the schedule of the activities are set, the monitoring mechanism is determined, and the people or the units involved in each activity are designated.

 Going through the first step, setting the vision, was easy. Everybody wanted to be sustainable and be the leading institution in their respective areas of operation. The mission statements were also unanimous which is serving the poor women and providing access to financial services to enable them to uplift their standard of living.

However, working on the assessment of the external environment raised issues that made the participants think not only about their future but the whole microfinance industry in Vietnam in general. The following issues are therefore considered “risk assumptions” that may affect the continuous operations of microfinance institutions in the country:

  •    Vietnam experienced consistent economic growth in the past several years, and the growth was coupled with declining rate of poverty.  As the country continue in its growth pattern and the poverty reduction measures become more successful, microfinance may become irrelevant several years from now.
  • Government poverty reduction programs are primarily with two government banks: The Vietnam Bank for Agriculture and Rural Development (VBARD) and the Vietnam Bank for Social Policies (VBSP). These banks provide subsidized loans to the agriculture sector and the poor in general. VBSP is even listed in the MIX market as the biggest microfinance provider in the country. Microfinance institutions cannot compete with these two institutions.
  •   Recent development in the rice industry showed a substantial number of farmers shifting to other crops as the price of rice keep going low. Most of the clients of microfinance institutions are rice farming families.
  •   The regulatory environment is slow in creating an environment that supports the development of the microfinance industry.  Of the than 50 microfinance institutions, only 2 are registered.

 Poverty reduction is of course a welcome development, but the idea of microfinance becoming irrelevant with the reduction of the number of poor people kept the participants thinking hard. If ever the trend continues, the question will be, are the microfinance institutions ready for that eventuality?

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