People’s Credit Fund: The Bank for Muong Ethnic Minority Poor Farmers

People’s Credit Fund: The Bank for Muong Ethnic Minority Poor Farmers

Hoa Binh, VietnamHanoi, Vietnam
Organization type: 
nonprofit/ngo/citizen sector
Project Stage:
Start-Up
Budget: 
$50,000 - $100,000
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

The project helps poor farmers gain better access to financial services and cope with extreme events to reduce poverty and improve community well-being.

About Project

Problem: What problem is this project trying to address?

More than seventy percent of Vietnamese farmers, the majority of whom are poor live in the countryside. It is reported that many of them do not have access to financial services that would allow them to invest in production activities and cope with climate extreme events. Further, the procedure is too complex and time consuming, in particular in terms of the time required to obtain a signature from the village cadres in order to be eligible for the loan. Consequently, they go to local moneylenders with extremely high interest, thus contributing to poverty in the already poor rural Vietnam.

Solution: What is the proposed solution? Please be specific!

People’s Credit Fund (PCF) is operated according to a hybrid of banking and cooperative system. The goal of PCF is to support its members and to bring into play collective action. This mechanism effectively mobilizes capital sources within the communities, especially in rural areas where people are not accustomed to the complex and time consuming banking procedures to be eligible to bank loans. One of PCF’s strengths is to have affordable financial products tailored to the needs of undeserved and excluded communities. Each PCF is an independent economic unit, but closely connected with each other through mechanisms of principal regulations, information exchange and risk management.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

Chinh Bui is a member of Bin village’s Women’s Saving and Credit group. In 2005, prior to the start of CECAD’s project, Chinh’s family was one of the poorest households in Bin village. Being a female head of the household, she worked very hard to support her family, but had problems making ends meet. In 2005 she was one of the first women who joined the village group’s Women’s Saving and Credit Group. With the support of the group members, she took a loan from the group to invest in animal husbandry. At the beginning, she kept chickens and ducks. Gradually, she saved money and bought cattle. In 2008, she had to sell her cattle to pay for her daughter to go to college. With a very small amount of money left, she decided to keep a sow. She learned a great deal from other group members how to raise sows. She has now becomes one of the most successful women who know how to keep sows and piglets. Her daughter graduated from college and has found a job. Her family becomes an upper-middle household. She has set a bright example for other women in the village to follow.
Sustainability

Marketplace: Who else is addressing the problem outlined here? How does the proposed project differ from these approaches?

There are governmental banks, such as Vietnam Bank for Social Policies and the Agribank that attempt to support farmers in the area. However, the procedure is too complex and time consuming, in particular in terms of the time required to obtain a signature from the village cadres in order to be eligible for the loan. Consequently, many poor farmers do not have access to bank loans, and go to local moneylenders with extremely high interest instead to invest in their production activities. CECAD is committed to help marginalized Muong farmers gain better access to financial services, thus contributing to poverty alleviation in the region.
Team

Founding Story

I have seen many women in the project site, who are very intelligent but did not have opportunities to go to school. They end up working hard, but earn much less than men do. Due to patriarchal norms, most of them have to give up their dreams and get married at a very early age. I recognized that the best way to help them to build a better life in their native village is to help them become more financially independent. Through better access to financial services, poor and marginalized women in particular and men in general will have opportunities to invest in production activities as well as other income generating activities, thus contributing to poverty reduction and community well-being improvements.
About You
Organization:
The Centre for Environment and Community Assets Development (CECAD)
About You
First Name

Hue

Last Name

Le

About Your Organization
Organization Name

The Centre for Environment and Community Assets Development (CECAD)

Organization Country

, HI, Hanoi

Country where this project is creating social impact

, HB, Hoa Binh

How long has your organization been operating?

More than 5 years

Has the organization received awards or honors? Please tell us about them

Yes. CECAD received an award from the Tan Lac People's Committee in 2009 for its contributions to the district's socio-economic development and poverty alleviation.

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Innovation
How long have you been in operation?

Operating for 1‐5 years

Which of the following best describes the barrier(s) your innovation addresses? Choose up to two

Access, Equity.

Social Impact
Please describe the goal of your initiative; outline what you are trying to achieve

The proposed project will help poor farmers in Thanh Hoi and Tu ne communes, especially marginalized women gain better access to financial services and cope with extreme events to reduce poverty and improve community well-being. Such initiative will encourage poor farmers, especially marginalized women to build a life within their community. This holistic approach encourages young people to stay in farming, which in turn secures food supplies for the region. A successful demonstration of this approach will be used to spread such practices to other communities in the province and across Vietnam.

Which barrier(s) to financial inclusion does your solution seek to address? (select all applicable)

Physical and other accessibility obstacles that prevent communities from reaching financial services, The lack of affordable financial products tailored to the needs of underserved and excluded communities,.

If you selected 'other' above, please specify which other barriers to financial inclusion you solution seeks to address:
For which underserved or excluded communities will your solution create access to valuable, affordable, secure and comprehensive financial services?

Tu Ne and Thanh Hoi communes are located in Tan Lac district, Hoa Binh province. The two communes support a population of 10,451 people. More than 70% of the population are people from the Muong ethnic minority group. Poor households in Tu Ne account for 31.7% and Thanh Hoi for 27.2% of the total. The majority of these households do not have access to loans or credits from either NGOs or governmental organizations. CECAD has helped establish a network for community development organizations from the village level to the commune level, under which community-based organizations have been set up to manage development programs, such as Women’s Saving and Credit Group in each village. However, those groups have been operated in piecemeal and isolated instances, thus hindering further success of the groups.

Could your solution work in other geographies or regions? If so, where?

The Vietnam Association of People’s Credit Fund (VAPCF) was established in 2005. It is the Government’s policy to spread the model to the entire country. It is therefore of great importance to establish more PCFs in Hoa Binh province in particular and in the northwest region of the country in general, where poverty is more persistent. So that more affordable financial products will be tailored to the needs of poor and marginalized ethnic minority communities, thus contributing to poverty alleviation in the region.

If your solution is dramatically successful, how will things be different in 10 years?

- 50% of the total population of the two Muong communities have access to financial services. So poor farmers, especially marginalized women will be able to invest in production and other income generating activities.
- PCF members’ income increased by 50% through income generating activities.
- Well-being of 50% PCF members will be increased.
- Two PCFs will be established in the region.
- When a life within their community will be built it will encourage the younger generations to stay with their families, thus minimizing migration to big cities.

What will have had to have changed to make this happen?

It requires the local government leaders at the provincial, district and commune levels to change their point of views about the governmental banking system:
- It is not the only financial service provider in the country.
- Accessibility barriers prevent communities from reaching financial services, thus contributing to poverty.
- PCF is operated according to a hybrid of banking and cooperative system. It financially supports its members and brings into play collective action.
- PCF contributes to construction of new rural Vietnam.
Capacity building for human resources and networking are needed.

What has been the impact of your solution to date?

CECAD began working in Tu Ne and Thanh Hoi in 2004. With support from the Inter-Church Organization for Development Cooperation (ICCO), CECAD has assisted two communes to improve livelihoods, protect the environment and preserve the Muong cultural identity. CECAD has helped establish a network for community development organizations from the village level to the commune level, under which community-based organizations have been set up to manage development programs, such as Women’s Saving and Credit Group in each village. Up to now, 724 members have contributed to their groups $30,000. Loans have been spent on cultivation and animal husbandry, which in turn help improve the status of women both at home and in the public. However, those groups have been operated in piecemeal and isolated instances, thus hindering further success of the groups.

What is your projected impact over the next five years?

- A People’s Credit Fund will be established for the population of Thanh Hoi and Tu Ne communes, Tan Lac district.
- 20% of the total population of the two Muong communities has access to financial services.
- Poor farmers, especially marginalized women will be able to invest in production and other income generating activities.
- PCF members’ income increased by 20% through income generating activities.
- Well-being of 20% PCF members will be increased.
- The point of views of the local governmental leaders about PCF will be changed so that PCF will receive more political support.

What barriers might hinder the success of your project? How do you plan to overcome them?

- PCF will compete with the other banks in the area. The PCF interest is lower than that of the bank. So farmers’ awareness of PCF will be raised.

- Members of the women’s saving and credit groups are concerned about the fact that their money will be merged with the money of the other groups in the communes. It might be difficult for them to withdraw the money when needed. Solution: More appropriate and clear regulations need to be developed.

- Due to low capacity of the management board of the Women’s Saving and Credit Groups, capacity building, workshops and study tours to success models will therefore be needed.

Winning entries present a strong plan for how they will achieve and track growth. Identify your six-month milestone for growing your impact

Establishment of a People’s Credit Fund in Tan Lac district

Identify three major tasks you will have to complete to reach your six-month milestone
Task 1

Register the Tan Lac District People’s Credit Fund with the State Bank and design its operational plans

Task 2

Build capacity for human resources

Task 3

Form a consortium with other banks and PCFs in the area

Now think bigger! Identify your 12-month impact milestone

PCF starts operating: giving loans to meet the needs of the poor.

Identify three major tasks you will have to complete to reach your 12-month milestone
Task 1

Build baseline data on natural resources of the area, including land, water and forest, as well as human resources

Task 2

Design affordable financial products tailored to the needs of the poor

Task 3

Allocate budget and search for market

Sustainability
Tell us about your partnerships

CECAD partners with the local government, Vietnam Bank for Social Policies, the Agribank and the Bank for Investment and Development of Vietnam. Gaining support from powerful stakeholders to help CECAD to win more resources – this makes it more likely that the project will be successful. Those partners will help improve capacity for human resources of PCF. By working closely with the local government, we have helped them design local development plans and public policy.

Are you currently targeting other specific populations, locations, or markets for your innovation? If so, where and why?

Yes, we are currently targeting other communities in other districts of Hoa Binh province to duplicate the model. The target is to have a PCF established in each district. In such a way, more poor farmers will gain access to financial services, thus contributing to poverty alleviation in the region.

What type of operating environment and internal organizational factors make your innovation successful?

Professional, friendly and reliable

Please elaborate on any needs or offers you have mentioned above and/or suggest categories of support that aren't specified within the list