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


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?

TYM Social Performance Assessment Completed


One of the main services of PFTAS is focused on the promotion of social performance management (SPM) as a tool for microfinance institutions. Part of these technical advisory services is the conduct of social performance assessment to determine if the institution has translated its social mission into operational policies and actual practices. In Vietnam, PFTAS has conducted a series of assessment to four microfinance institutions – Dien Bien Phu, Ha Thinh, Thanh Hoa, and World Vision MFU – as part of the Financial Inclusion project funded by EU and AFD which ended last January.

This year, PFTAS provided the assessment services to the TINH THUONG ONE MEMBER LIMITED LIABILITY (TYM) Microfinance Institution. TYM started as a project of the Vietnam Women’s Union (VWU) tracing its humble roots in 1992 in Minh Phu commune, Soc Son, Hanoi, where the first 20 women were provided with financial services. In 1998, it was made as an independent department of the VWU and an income-generating unit in 2006. Finally, it was registered and licensed as a microfinance institution in August 2010. At present, TYM is operating in several provinces with a loan portfolio of $23,244,130.00 serving 84,090 clients.  Average loan size remains low at $276.42, reflecting the low-income level of the borrowers. Being one of the only two licensed microfinance institution in Vietnam, it has the burden of covering more areas and reaching out to more clients and at the same time lead the way for the other emerging institutions in the country.


The CERISE Social Performance Indicators (SPI) was used in the TYM assessment. The tool focused on four main dimensions to evaluate the institution’s adherence to social performance practices. The dimensions are: targeting and outreach; product and services; benefits to clients; and social responsibility. The tool was administered to various levels within the institution, from the decision makers, the management team and to the field staff in the branches. Clients were also included in the diagnostic exercise. The results of the assessment will provide a picture of the institution and will be the basis for adjustments and realignment.

The results showed that the institution is clear with its mandate of serving the poor especially disadvantaged women. It has not veered away from their mission and has been consistent since its formation 21 years ago. Being the first to be licensed and the only one operating north of the country can be considered as one of the main strengths of the institution. The wide range of products and services and the big operational network that ensures outreach even to the remotest areas of the country contributes to its effectiveness as a financial services provider to the poor.

Social Performance Management (SPM) Training for Microfinance Institutions

Social Performance Management (SPM) is a management tool used to translate the mission statement of microfinance institutions into reality and be able to keep track on how they perform in line with the internationally and socially accepted indicators. This will ensure that MFIs will continue to serve the poor, despite the issue of commercialization and moving towards bigger borrowers.

A training of trainers will be conducted in Cambodia and Vietnam for selected MFIs to re-enforce the capacities of the respective SPM point persons in providing guidance as mentors in the process of SPM institutionalization. The training activities are slated on August 13-17 in Phnom Penh, Cambodia; and August 20-24 in Hanoi, Vietnam.  The topics covered in the training are coaching and mentoring skills, social performance standards and client protection principles.

The training is expected to develop in-house pool of capable SPM point persons whose major role is to ensure that SPM is in-place in their respective MFIs.  The knowledge transfer gained out of this effort will pave the way to disseminate and expand SPM adaptation among other MFIs in the two countries.  The entire process of SPM institutionalization is part of the various  technical assistance provided by PlaNet Finance, in partnership with the Cambodia Microfinance Association (CMA) and the Vietnam Microfinance Working Group (MFG)  to strengthen their  over-all institutional  capacities, under the project “Improving Financial Inclusion and Social Impact Towards Food Security in Southeast Asia” (FinInc Asia).