Cement being packaged at Bac Giang Cement Co. Viet Nam is one of the nations in Southeast Asia with the lowest rate of access to financial services. — VNA/VNS Photo Vu Sinh

HA NOI (Biz Hub) — Viet Nam is facing challenges in granting the poor with access to micro- and general finance, with only 21 per cent of Vietnamese adults having access to these informal services.

Micro-financing provides small loans that enable poor households with little or no access to formal financial institutions to take part in production or start up their small businesses. It includes several services such as credit, savings and insurance.

At a conference on micro-finance held here last Tuesday, Nguyen Phuoc Thanh, Deputy Governor of the State Bank of Viet Nam (SBV), identified Viet Nam as one of the nations in Southeast Asia with a low rate of access to financial services.

"The country has been on the road to informalisation and professionalisation," Thanh said at the conference entitled "Towards a sustainable and responsible micro-finance sector in Viet Nam."

"However, women and the poor have less access to financial services, especially in rural areas, and only 8 per cent of adults have savings in formal financial institutions," he added.

Thanh said Viet Nam has been challenged in the area of competitiveness, which required improving the capacity of organisations for capital, human resources and management, and the renewal of technologies and services.

A study of theTYM Fund, the country's first licensed micro-finance company, showed that micro-finance has helped to raise the living standards of millions of households by helping poor and low-income earners gain access to financial services.

According to the study, more than 90 per cent of poor households were able to earn larger incomes and generate enough capital for production and businesses after using micro-finance services. This shows that the sector has actively contributed to the country's socio-economic development.

Duong Thi Ngoc Linh, TYM Fund General Director, said his company's products, including loans for businesses, construction and repair, have proven to be tailor-fit to the needs of the poor.

TYM Fund has provided loans to people without requiring any collateral. Last year, it lent around VND1.08 trillion (US$51.7 million), with a total debt balance of VND582 billion. As of May, it has offered loans to 97,200 people, with a debt balance of VND640 billion ($30.48 million).

Margaret Miller, a World Bank senior economist, said the demand for financial services in developing countries was high, as 70 per cent of adults in these countries had little or no access to services such as savings, credit, payment and insurance. The percentage was even higher among women and the poor, and in rural areas.

The model of development will bring both opportunities and challenges to financial institutions that serve low-income earners, Miller said. — VNS