Microfinance programs in Vietnam -- Habitat for Humanity Int'l 1
Microfinance programs in Vietnam
By Mark Estes
In Exodus, we are told the story of Moses receiving a visit from his father-in-law, Jethro. When Jethro saw all that Moses was doing for the people of Israel, he gave him some helpful advice, “What you are doing is not good. You and these people who come to you will only wear yourselves out. The work is too heavy for you; you cannot handle it alone.” (Exodus 18:17, 18)
Habitat for Humanity in Vietnam is applying this advice to our work in helping alleviate substandard housing. The Habitat Vietnam team rarely swings a hammer or sources bricks from a supplier. Instead, we serve as collaborators; evaluators; contract negotiators; consultants and advisers; providers of technical assistance and support in developing sustainable, community-based microfinance housing programs. Working in partnership with local groups, HFH Vietnam is making a significant impact in a very short period of time.
HFH Vietnam began testing this approach in March 2005, when it embarked on a collaborative project with the Women’s Union of Kien Giang Province. Over a period of approximately 10 months, the pilot project offered housing loans to 800 families in four communes. The loan size range of US$75 to US$280 offered repayment terms of up to 36 months. HFH Vietnam provided technical assistance and training to the Women’s Union, which was responsible for the ongoing management of the revolving loan fund. The loans, providing financing for physical repairs as well as water and sanitation improvements, were repaid in either monthly, quarterly or six-month increments.
A key factor in achieving this type of scale is choosing the right partner. The Women’s Union is dedicated to working with the poor, and has an established network of women’s groups and a history of development finance. The women’s groups have knowledge of the livelihood strategies, income and expenditure cycles of the families. Habitat’s role is to help the women’s groups think through the issues of how to establish the housing finance products and provide training and oversight to the technical aspects of providing such a loan. We also aim to help the partner to develop capacity to manage a revolving fund and attract new (non-HFH) capital.
In addition, the Women’s Union ensures long-term and sustainable operations, since it is one of the Vietnamese government’s mass organizations, working in each province at every political level down to the village. Homeowners will be able to return for successive financing to continue to repair or improve their homes in stages. We anticipate that many first-time borrowers will be able to complete subsequent improvements using skills learned during first loan and technical support interventions.
In July 2006, the Capital Aid Fund for Employment of the Poor (CEP), a microfinance institution based in Ho Chi Minh City, audited the fund management and performance of the pilot project. This outside audit was very encouraging—it verified the benefit to so many families in such a short time period. The report stated: “In terms of credit management, loans have been issued of a size that meets each family’s requirements and...with the capacity of clients to repay...based on family incomes.” Because of the six-month repayment schedule, the audit was unable to adequately assess the ultimate sustainability of the program; however, the outlook was extremely promising based on the early signs and systems in place at the community level. First quarter reports in FY07 indicated that out of 864 loans, 861 were current (within 30 days)—a 99.7 percent repayment rate!
The audit also documented some important observations as HFH Vietnam considers expanding the program to other communities and working with other partners:
- The financial controls and systems were dependent on the monitoring of HFH Vietnam staff, due to the limited capacity of the Women’s Union in accounting and financial reporting.
- Staffing of the Women’s Union was sufficient to manage the pilot project, but increased scale would stretch the capacity, require additional staffing and, consequently, an increase in the interest rate or continued investment from HFHI in order to maintain operational sustainability.
Therefore, the success of the program is dependent on HFH Vietnam for several years, both in terms of staffing support and monitoring as well as funding.
HFH Vietnam has begun a new pilot with the Tien Giang Provincial Fatherland Front and Red Cross to provide 1,089 families with improved sanitation and housing. These mass organizations have been focused on providing totally subsidized solutions for the very poor and have never before partnered with an international nongovernmental organization. This historic partnership with Habitat, along with funding from the UK- based Jersey Overseas Aid, will expand their program to include housing products for clients that have the ability and willingness to pay. Tien Giang Province will continue to use 30 percent of its funding to serve the poorest of the poor, while 70 percent will be invested in the Vietnam Shelter Fund, providing sanitation and home improvement loans. HFH will support the development of financial and project management systems, and housing products for the loan program.
Habitat, with its expertise in housing, holds a unique position as an organization focusing on partner capacity development in housing microfinance and technical support. In the role as catalyst, Habitat fills the inevitable void between government subsidy, which is never enough, and commercial lenders, who won’t lend to the poor. By collaborating and encouraging the participation of other important players, the results can multiply quickly. By applying the advice Moses received from Jethro and working with partners also engaged in poverty alleviation, HFH Vietnam is helping many more families than we could on our own.
Mark Estes is the national director of HFH Vietnam