t 227;m t 190;t b 184;o c 184;o - MandE

t 227;m t 190;t b 184;o c 184;o - MandE Impact assessment, Ky anh credit and saving program acknowledgement We would like to express our gratitude to Ms. Tran Thi Tuyet Anh and staff members of the Ky Anh Women's Union, staffs of visited commune's unions for their support during the field trip and the implementation of the report. Their participation and contribution has been critically important to this report. Ms. Nguyen Thi Oanh, Program Coordinator, Ms. Ngo Thi Loan, Acting Program Officer has supported us a lot in the finalizatioof the report. We appreciate very much their supports. Our final word of thanks go to member borrowers and non-borrowers for the patience in answering out questionnaires. This report could not have been finished without their participation. The Consultant Team Hanoi, November 2002 ii Impact assessment, Ky anh credit and saving program table of contents table of contents ---------------------------------------------------iii Executive summary ----------------------------------------------------iv I. Key Findings ----------------------------------------------------- iv II. Key Recommendations ---------------------------------------------- v part a - Introduction ------------------------------------------------1 I. An overview on the credit and saving programs in ky Anh, ha Tinh -- 1 II. The assessment --------------------------------------------------- 1 III. Methodology ----------------------------------------------------- 2 Part b - Credit and saving project assessment ------------------------5 I. Group activity ---------------------------------------------------- 5 II. Lending --------------------------------------------------------- 10 III Savings Activities ---------------------------------------------- 13 IV. Funds ----------------------------------------------------------- 19 VI. Monitoring and assessment --------------------------------------- 23 VI Sustainability of the project ------------------------------------ 26 VIII. Training ------------------------------------------------------ 34 IX. Organisation and human resources -------------------------------- 35 X. Impacts of the project ------------------------------------------- 38 X. SWOT analysis of ky anh credit and savings project --------------- 50 Part c - Conclusion and recommendations -----------------------------52 I. Conclusion ------------------------------------------------------- 52 II. Recommendations ------------------------------------------------- 53 iii Impact assessment, Ky anh credit and saving program Executive summary The Credit and Saving Project managed by the Ky anh Women Union in Ha Tinh is a component of the Ha Tinh Poverty Reduction Program financed by DFID and implemented by Oxfam UK. The Project aims at: (i) improving the living conditions of poor women; (ii) strengthen the capacity of Women?s Union staffs, and (iii) build a suistanable credit and saving model wich can be replicated in othe provinces. The Project has been implemented since 1997 and after 5 year of operation has contributed to the poverty reduction in the province. The project is now at the stage of strengthening and tranfering to local counterpart. Before being transferred to local counterpart, it is important for Oxfam UK to commission an impact assessment to (i) assess results and achievements of the project after 5 years of implementation; (ii) measure the impact of the project on Project beneficiaries, particulary poor women borrowers; (iii) evaluate the impact of the Project on the capacity of the union?s members and women?s union; (v) identify constraints and issues in the implementation of the project, and (vi) make recommendations to ensure the sustainablity of the Project once Oxfam UK ends its supports. Key findings and recommendations of the report could be briefed as follows: I. Key findings After 5 years of implementation, the Project is now covering 10 communes in Ky Anh with 3,328 members, accounting for 73% of poor houselds in the project area. This indicates a percentage lower than the target 90% planned at the outset of the Project. However, it should be confirmed that this is a creditable success fot the Project since reaching 90% of poor women households is too challenging given the limited resources of the Project (financial and human resources) and the increased outreach of official financial institutions like VBARD, VBP to the poor at lower interest rate. The Project has made significant contribution to poverty reduction at districts. In general, the Project has achieved objectives related to living condition improvement, income improvement. Survey results indicated that the majority of member borrowers (91%) disclosed an increase in income though the increase level varies between communes. The Project also helps to enhance awareness and understanding of women?s union member about gender issues, environmnet protection..., giving them opportunities to discuss business and life experience and. As a result, the status of poor women in the family and the community has been improved significantly. The credit model applied by the Project is a tool to empower poor women by giving them chance to participate in decision making in relations to borrowing loans, utilizing the loan and the income iv Impact assessment, Ky anh credit and saving program generated from it. This helps to build up self-confidence among poor women. Project staffs from district to commune level are all trained on various skills like credit, accounting (depending on the job they are doing), group management, leadership, communciation... Thanks to these training, project staffs have been able to improve their capacity significantly in terms of (i) manaing a credit and saving program; (ii) social activitiy (communication, leadership, management). Women?s union at all levels have used knowledge and experience obtained under the Project to their own career development and their main job. As a result, the union?s activities have become more interesting and attractive to members. Many poor women were given opportunities to prove themselves and emerged as capable leaders at communes. At their communes, their capability is being further appreciated and they will definitely make further contribution to improving the living conditions of their families and others in the community. The impact of the project does not limit itself to direct beneficiaries and project staffs. Its impacts has spread over the community and other instittuions in the project area. The approach, lessons learnt from the project are being studied by local institutions for further applicaiton in similar projects. The success of the Project has proven the suitablity of the saving and credit model in providing credit to poor women in Vietnam , contributing to the goal set by the Government of Vietnam in poverty reductiohn. Therefore, many lessons learnt from the Project could be applied when replicating the model in other provinces. Among these lessons are the poor household survey, member classification by poverty level, two-level model with considerable dentrentralization to the commune level, lending and repayment mechanism, saving mobilization, training.... II. Key Recommendations Despite the achievement of these positive resutls, there remains a number of constraints which need to be addressed for the Project to become sustainable after Oxfam UK ends its support. 1. To the Ky Anh Women's Union 1) Stronger emphasis should be laid on widening the outreach to poor members in the Project areas. Survey results show that despite signficants efforts from the Project and from formal financial institutions operational in the project areas, many poor women in the project areas remain unable to reach financial services. Therefore, the project should widen its outreach to the poor, particularly the poorest, members. 2) Group activities need to be strengthened and improved. Group leaders should be rotated so every group member would have a chance to lead the group and contribute to the development of the group. At the group level, a deputy group leader should b v Impact assessment, Ky anh credit and saving program added. District project management unit should assist commune in preparing group activity plan. 3) Saving mobilization and management should be improved. Savings management should be regulated in all districts in the orientation that member cannot withdraw savings during the time they are still member of groups. Saving interest rate should be adjusted to be equal to demand saving interest rate offered by VBARD; as high as 80% of the savings mobilized could be used for on-lending. Deposits at banks and withdrawal from banks should be evidenced by two signatures and districts PMU should request for bank statement on the deposit of savings at banks on a monthly basis. 4) Funds management should be improved. The portion of interest rate payable to the district PMU (17%) should be separated into three items for three spending purposes: administration costs, training and supervision. 5) Booking keeping and reporting should be adjusted. This is related to the building up of an management information system. There should be an assessment on the information needs which are most necessary for project management (for district PMU and the donor). Book keeping system and reporting requirements should be simplified in a way that lessening the reporting burden which is now being carried by commune staffs and group leaders. Requests for overlapped information should be reduced. Reporting system at district level, particularly those related to financial issues, should be standardized, making sure that they are most in conformity with accounting requirements. 6) Training should be strengthened. The sustainable development of the model depends very much on the management and implemenation capacity of local parters. Once the project activites at commune level have been smoothed, the district PMU will limit its role essentially to monitoring, supervising and evaluating Project's activities. It is therefore important to improve the monitoring and evaluating capacity (on process, content....) of management staffs (at district and commune level). An overall well-prepared training program would therefore be very necessary. 7) It is also imperative to train members so they can be empowered to overcome poverty. The Project should coordinate closely with Government program in providing supporting services and training to members. 8) Development orientation should be clearly specified. There should be a plan that faciliates members eligible for banks loans to graduate to become borrowers of VBARD. High priority should be given to an action plan until the project ends and an operation plan for the next two years in order for the Project to become sustainable. While waiting for a new microfinance regulatory framework for microfinance in Vietnam, efforts to achieve the financial and institutional sustainablity of the Project should be stepped up. vi Impact assessment, Ky anh credit and saving program 9) The frequent changes of project management staffs have left impact on the sustainablity fo the project. It is therefore important that the Women's Union develop a human resource plan, particularly for the commune level. 2. To Oxfam UK Before ending its support, Oxfam UK should take into account the implementation of the following solutions: 1) Provide additional funding in order for some communes to become sustainable thanks to operation scope. A number of commune have not been financially sustainable since operation scope (in terms of number of members, capital sources...) is low. As a result, Oxfam UK should provide additional fund to some communes so they can increase their operation scope and then financial sustainablity. 2) Project management staff should not be changed frequently. Oxfam UK has 4 times changed its staff who is in charge of the project since the project commencement. This has partially impacted negatively on the implementation of the Project. The stability of project management staff is important to ensure the continuity in project management activity. 3) Technical supports to Women's Union should be strengthened. Oxfam UK should further support the Ky Anh Women's Union in preparing plan for the next two years and operation plan until the project ends. Supports to training manual compilation are also highly recommended. 4) Supports to training on agriculture extention, business of borrower members are also important. Instruction mannual on some selected production and business models could be developped and delivered to borrower members. It is believed that these recommendations will help to improve the sustainablity and benefits to poor women in the Project areas and their community. vii Impact assessment, Ky anh credit and saving program part a Introduction I. an overview on the credit and saving programs in ky Anh, ha Tinh The Credit and Saving Project managed by the Ky anh Women Union in Ha Tinh is a component of the Ha Tinh Poverty Reduction Program financed by DFID and implemented by Oxfam UK. The Project aims at: (i) improving the living conditions of poor women; (ii) strengthen the capacity of Women?s Union staffs, and (iii) build a suistanable credit and saving model wich can be replicated in othe provinces. Expected outputs of the project are the followings: , Project operation quality is improved in order to increase outreach to poor members; , Capacity of project staffs and participating members is improved. , The credit and saving model is sustainable and the model applied in Ky Anh is recognized. The Project has been implemented since 1997 and after 5 year of operation has contributed to the poverty reduction in the province. The project is now at the stage of strengthening and tranfering to local counterpart. Therefore the documentation of success, constraints, opportunities, challenges are necessary for both the donor and local counterpart in order to ensure the eventual sustainablity and efficiency of the PRoject. II. the assessment The assessment of the Ky Anh Credit and Saving Project focuses on the following objectives: 1. Assess the results and achievements of the Project after 5 years of implementation on the basis of objectives indicated in the logic frame of the Project. 2. Assess the impact of the project on beneficiaries, particularly on women borrowers in terms of workload, changes in awareness and gender behavior. Impacts on the living conditions of the women poor. 3. Assess the impacts of the Project on the capacity of women's union members and staffs and related local agencies. 4. Evaluate the credit and saving model applied in Ky Anh in terms of its sustainability and replicability in other localities. 5. Identify constraints in project implementation, project impacts and analyses opportunities and challenges of the Project; on that basis, provide recommendations for the next phase of Project. 1 Impact assessment, Ky anh credit and saving program To implement the assessment, the assessment team has been selected. The team is led by Dr. Dao Van Hung, Deputy Director of the Microfinance Resource Center and lecturer of the Banking and Finance Faculty, the National Economics University. Other members of the team are reseachers of the Microfinance Resource Center, including Le Duy Binh (MBA), Le Minh Nguyet (MPA), Tran Binh Minh and Maureen Wafer. The team was supported by two local enumerators, Ms. Hoang Thi Minh and Ms. Pham Thi Nga. III. methodology Evaluation methods are detailed in Table 1. The team spent two day discussing the evaluation tools. The tools and methodologies were also discussed with Oxfam UK. In the field, after discussion with project management unit at district PMU, the team was split into two for questionnaire survey in 5 communes. Table 1: Summary of Assessment Methodologies Assessment Methodologies Notes Objectives 1. Assess , Secondary data , Assessment will be the results analysis and both quantitative and literature review (with statistic data) achievement(project documents, and qualitiative. s of the related reports, This process will Project statistics on local highly involve after 5 economy...) participation of years of various project , Interviews with implementatholders. staffs of Oxfam UK, ion (on the project staffs, basis of women's union staffs, objectives and related agencies. indicated , Field observation. in the , Comparison, logic frame consolidation. of the Though presented separately, Project). all of these assessment objectives were conducted in an integrated manne. Qualitative and quantitative methods are used in a combination. In addition, participation of different project stakeholders are maximized through participatory rapid assessment methods 2 Impact assessment, Ky anh credit and saving program 2. Evalua, Questionnaire , Quantiative method is 1te the ensured through the interview on 294impacts on member borrowers questionnaire woman (among 3,000 interview with the borrowers borrowers) in 5 out total sample (in terms of 10 communes representing 9% of of living participating in the total borrowers under conditions, Project. Visits were the project (this social paid to 1 commune not figure proves that status...). included in the the statistis Project with 5 generated from the women's union members questionnare survey visited (Ky Lac are highly commune). statistically significant). , Focused group discussions. , Focused group discussions has , Field observation. ensured a higher , Other visual methods level of participation of different project stakeholders in project assessment. Assess the , In-depth interviews impacts of with the union's the Project staffs and member on the borrowers. capacity of , Secondary data women's review. union , Field observation. members and , PRA methods. staffs and , related local agencies. Evaluate the , Discussion and credit and interviews with saving model professional staffs, applied in beneficiaries. Ky Anh in , Analyse the model. terms of its , Compare the model sustainabiliwith others in the ty and Vietnamese context. replicabilit y in other localities. In each commune, the team conducted interviews with borrowers and non-borrowers (please refer to table 2). Team discussions are held by the end of each day of the field trip for information exchange. In addition, additional meetings were also held with leaders to Ky Anh authorities for their comments and recommendations. The team also visited Ky Lac commune, a non-project area where a people?s credit fund is functioning efficiently. The visit is for comparison purpose and information sharing. 1 The number of members interviewed during the field trip is actually 308. However, 14 were eliminated since they were not eligible for data processing. 3 Impact assessment, Ky anh credit and saving program Preliminary results of the assessments were presented at a seminar in Ky Anh. At the seminar, the assessment team presented briefly key findings and recommendations to the local project management unit, Oxfam UK and many useful comments were given to the team. Table 2: Number of member borrowers interviewed at communes Ky Ky Ky 2Ky Hoa Ky Lam Ky Lac Total Ninh Dong Hung Number of villages 3 3 4 2 2 14 visited Number of members 68 73 73 59 21 294 interviewed Total of members 355 340 460 220 218 3.328 in the commune % of interviewed 19,2% 21,5% 15,9% 26,8% 9,6% 8,8% members In carrying out the assessment, the team has used to best practices and benchmarks in microfinance introduced by CGAP (Consultative Group to Assist the Poorest) as the basis for its analysis, comments and recommendations. However, a number of adjustments have been made to make sure that actual conditions in Vietnamese context are taken into account. In the implementation process, the Consultant Team did meet a number of obstacles in collecting secondary information data, the mismatch and conflict in some cases of information and data provided. The separation of impacts from the project with those from others was not feasible due to the small size of sample. In stead, the consultant team used some other measures like focused group discussions, in-depth interviews and visual comparison. We would like to express our thanks to Ms. Ngo Thi Loan, Acting Program Officer of Oxfam UK, Mr. Nguyen Xuan Nguyen, Oxfam UK consultant, Ms. Nguyen Thi Tuyet Anh and other staff members of the Ky Anh Women?s Union for their supports and comments during the implementation of the assessment. We are also grateful for the time of member borrowers in answering our questions. Their contribution is essential to the finalization of this report. 2 Representing the figure for the whole Project Area, i.e. Ky Anh District. 4 Impact assessment, Ky anh credit and saving program Part b Credit and saving project assessment I. Group activity 1.1. Beneficary Selection The poor, particularly the poorest - those who do not have opportunity to access formal financial services – is identified as the key beneficiary of the Project. Communes which are benefiting from the project all conducted a poverty survey on their members. There is no specific criteria for the selection of communes to be included in the project. The selection of communes is decided by the local counterpart. Often, the counterpart rely on whether the commune has benefited from other credit and saving programs and the density of the poor in the commune. Oxfam UK does not establish a specific criteria for member classification by poverty level. It only supported the local counterpart in doing so. Based on the actual local conditions and experiences in other communes, the local Women?s Union worked out their own classification methodologies and criteria which prove to be more suitable to the local context. At each commune, members are selected through a thouroughly-conducted social economic survey. This is a very pratical and efficient method which has been rarely applied by other credit and saving programs. It is believed that the techniques and lessons learnt from this method could be applied in similar project. In selecting beneficiary members, the local women?s union did refer to the classification of the commune people?s committee so the difference between those classifed as poor by the union and those on the list of the people?s committee is negligible. The consultation with local people?s committee is necessary since information sharing will generate support from the committees, and thus increasing the efficiency of the project. On the basis of the poverty survey, the Ky Anh Women?s Union and related communes prepared Project Description. These description could be considered to be the baseline survey to evaluate the implementation of the project. Also, the project description is used as a guideline by commune union?s staffs in group training, credit disbursement.... This method makes sure that the project is more focused on the poor and very poor. Furthermore, it ensures the transparency, fairness and the participation of the beneficiaries in the design and implementation of the project. Table 3: Member Classification by Poverty Level before Project Implemenation at communes. Unit: % 5 Impact assessment, Ky anh credit and saving program Ky Ky Ky Hoa Ky Hung Ky Long Ky Ninh Ky Dong Ky Phu Thuong Khang (11/98) (10/98) (01/99) (08/99) (12/99) (01/00) (04/99) (09/99) Hungry 13.74 1.51 10.82 33.33 7.35 11.98 17.43 3.30 Poor 42.96 42.21 25.54 42.81 88.16 40.42 28.15 26.37 Average 43.30 56.28 63.64 23.86 4.49 47.60 54.42 70.33 Total 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 Source: Ky Anh Women?s Union *Ky Lam and Ky Giang have recently finalized the survey and data consolidation has not been finalized. The table indicates the poverty level among the women?s union in some communes. The data show that most of members benefiting from the project are classified as hungry and poor. However during the survey process, the consultant team observed that many poor households had not participate in the Project and many groups did have better-off members. The participation of better-off members are both positive in terms of group leadership, sharing of knowledge... and negative in the sense that they may dominate the group (particularly because of the inferior complexity psychology of the poor). There are many reasons that explain why many poor members remained unreached by the Project. Many poor members themselves have not taken up the courage to join due to the lack of confidence that they can repay the loan. They normally take no action, observing other members before deciding to borrow. As a result, in order to reach more to the poor, training to improve the production capacity and business skills of the poor is very necessary. 2. Group Activity a. Group formulation Groups are established on a voluntary basis. Members of groups often live in the same village and all are members of local women?s union. In a group, total members vary between 8 to 15. This group size is suitable to the management capacity of group leaders and commune women?s union staffs. Group formulation process is seriously observed in all communes. As a result of a good selection of project beneficiaries, all groups functions function well within the overall goal of the Project. b. Group Operations There are now 315 groups functioning in 10 communes. Since the Project started, there have been 48 groups to be dissolved either because the groups do not function efficiently, or members ceases their membership or a group merges with another. Ky Phu is the commune with the largest number of operational groups at 64, followed by Ky Dong 44, Ky Thuong 37, Ky Hoa 31. Ky Giang has 6 Impact assessment, Ky anh credit and saving program least operational groups (15) since it only joined from January 2002. Total members of all group are currently 3,351. Member drop out rate for the whole project is 2.5%. This percentage is highest in Ky Hoa (4.5%), Ky Ninh (4.1%) and lowest in Ky Lam (0%). Reasons for dropping out are members getting too old to retain their membership, changes of living place, economic conditions improving to the level that they are no longer eligible for loan from the project. The drop-out rate is lower than that in 3many similar programs. This also indicates how the project has been attractive to its members. Groups meet frequently on a monthly basis. It is stipulated that minutes should be prepared after each group meeting. However, minutes have so far been taken in important meeting, e.g. meeting on member evaluations, acceptance of new members… Minutes are often not taken or taken inseriously in other meetings. Groups often meet for the purpose of interest and principal collection. In addition, members often combine credit and saving activities with other social activities like singing, sports… Group activities are also combined with programs of the women?s union like family planning, cultural family building, children nutrition… These activities have been very useful to improve markedly the knowledge of its members. Under the project, training on agriculture extension was also planned. However, such training has been delivered only once to member borrowers. Supports to members in terms of agriculture extension, business skills… through training are still limited both in content and quantity. Member presence at group meetings is high. The presence rate is highest in Ky Giang, Ky Khang, Ky Hung (approx. 99%) and lowest in Ky Long, Ky Thuong (90%). During field interviews, many group members disclose that they have no demand to borrow loan but still join the group and save. They simply want to join group other group activities like sports, cultural activities (woman football, volley ball, activities on the international women?s day…). Groups do show their spirit of mutual help when one member is in difficulty. There was one case in which a member was dead, the group has accepted the participation of her husband in the group. Group activities are very diversified. However, if there is no a concrete action plan for improvement, they are likely to become boring. Therefore, the district PMU should assist groups in activity planning. c. Capacity of Group Leaders 3 The drop-out rate among members in the project is lower than some similar credit and saving projects financed by other organizations. E.g. under the Credit and Saving Project No. V0611 funded by CIDSE, the member drop-out rate was 9,5%. 7 Impact assessment, Ky anh credit and saving program Group leaders are elected by group members. They are often members who stand out for their economic conditions and communications skills… They have a better capacity in group management and group leadership. However, there remains a number of constraints. , Group leaders take both the function of an accountant and cashier. This issue should be promptly addressed since they are not suitable to on key principle in accounting: one person taking both the functions of an accountant and a cashier. , Group leaders and deputy group leaders should be elected in rotation. The purpose is to ensure that every group member has the chance to contribute to group activity. This is also a chance for group members to improve the capacity and social status. When group leaders and deputy group leaders are elected in rotation, they will not be remunerated. This will help to reduce operation costs and increase the self- sufficiency (please refer to the section of Sustainability Analysis). 8 Impact assessment, Ky anh credit and saving program Table 4: Number of groups in communes Ky Hoa Ky Ky Ky Ky Lam Ky Ky Ky Ky Phu Ky Total Dong Hung Ninh Long Thuong Khang Giang 11/19901/20010/19908/19901/20001/19901/19909/19901/20001/200Starting time 11/97 7 0 8 9 1 9 9 9 0 2 Number of month in 54 31 45 35 19 43 39 32 30 5 operation Number of operational 315 31 44 17 29 20 25 37 33 64 15 group Number of dissolved group 48 1 4 2 35 6 0 Number of selected 3437 330 475 225 366 230 265 390 346 680 130 members Number of trained members 3390 326 473 225 360 218 265 375 346 665 137 Number of dropped-out 87 14 7 5 15 0 9 15 12 10 0 members Drop-out percentage 2,5% 4.2% 1.5% 2.2% 4.1% 0.0% 3.4% 3.8% 3.5% 1.5% 0.0% Number of current members 3.351 355 460 220 340 218 256 360 334 655 153 Average number of member 10 10 10 13 12 11 10 10 10 10 9 in a group Number of meeting in a 1 1 1 1 1 1 1 1 1 1 month Presence rate at meeting 96.60% 98% 98.90% 95% 98.30% 90% 90% 99% 98.10% 100% Source: Ky Anh Women? Union 9 Impact assessment, Ky anh credit and saving program II. Lending 1. Lending results From Project Funds Total loan volume increased rapidly in the initial years of the project (14 time year-on-year increase in 1999 and then a double in 2000). This is mainly due to the increase in communes included in the program in these initial years. After 5 years of implementation, total accumulated lending increased to VND 7 billion as of June 2002. Ky Hoa is the commune with highest loan portfolio of VND 1 billion. Ky Giang has lowest loan outstanding at VND 107 million since the commune has just joined the Project. Accumulative number of loans made in the last 5 years is 6,800 with an average loan size of VND 1.03 million. With the total active members of 3.328, it could be estimated that each member have been able to borrowed two times under the 4Project. Total loans outstanding at of 30 June 2002 under the Project was VND 1,663.1 million. Saving Mobilization In addition to Project funds, saving mobilization is an important source of funds to finance the loans made to borrowers. As of 30 June, 2002, total loans financed by mobilized savings reach VND 501.7 million, accounting for 23% of total loan portfolio which is financed by both the project funds and saving mobilization. This is also an impressive results, proving the capacity to save of the poor in a suitable credit and saving mobilization model. 2. Repayment According to project regulation in the first two months of a loan cycle, borrowers only have to pay interests generated in the two months. From the third month onward, the borrower has to pay the interest and a portion of the principal (1/10 of the principal). This calculation method is easy to understand, easy to remember for borrowers. However, some members indicate that it would be more convenient if the grace period is lengthened from current 2 months to 3 months. According to them, 3 months would be enough for an income generating activity (e.g. animal husbandry…). According to reports by the district PMU, repayment rate is as high as 99.2% - an impressive figure for a microfinance program. This reveals a good management capacity of the PMU and the suitability of the credit and saving model used in Ky Anh. 100% of the loans are made through groups which consist of 10 – 15 members. Group lending and monitoring is an important factor ensuring the high repayment rate under the project. 4 In practice, many members could borrow 3-4 loans from the Project since many members just joined to benefit from other project activities other than borrowing. 10 Impact assessment, Ky anh credit and saving program The cash used by members to repay the monthly installments is generated from the activity financed by the loan. (64.9% of respondents). 35.1% disclose that they use other source of income to repay the monthly due amounts. Such incomes are generated from sale of chicken?s eggs, sale of vegetables, petty trading… For many members, this repayment method helps them to ensure their repayment capacity and helps them to have a considerable amount of saving by the end of the project cycle. 3. Lending process and loan application procedures To borrow a loan, a member should submit a loan application form, indicating loan purpose. Project manager at commune level is the person who appraise the application. The loan application should be approved by the project manager at commune level before being discussed in groups. A minutes will be prepared in that meeting and the minutes will be used as the basis for loan decision. According to stipulation stated in project description, loans are made to 50% of group members for the first time and then to the other members. This stipulation has helped to strengthen the solidarity and mutual help among members of the groups. Priority is given to poorer members in the group. Equality in accessing to project funds is ensured among all group members. Loan procedures are much more simple than those demanded by banks like VBP and VBARD. This feature is highly appreciated by most respondents (98%). This proves that an international best practice – simple procedures – have been efficiently applied in Credit and Saving Project in Ha Tinh. 4. Loan size and maturity The average loan size under the project is VND 1.03. The loans made to one member increase in size after each time a loan is repaid. According to project regulation, the first loan cannot exceed VND 500,000, second loan 1,500,000 and third loan 2,000,000. This increasing size is suitable to the management capacity of poor members, particularly those who have not had a chance to manage a big sum of money. In reality, it is still possible to exceed these limits depending on the capacity of borrowers and availability of funds in the commune (on the principle that such excess will not dent the accessibility of other members to the project loans). This gives more flexibility to lending activities at commune level. However, like under many other credit programs (by the Government or by formal credit institutions like VBARD and VBP), members often complain about the stipulation that they cannot borrow the second loan if the first one has not been repaid. Since the demand for funds are very much different at different times of the year, this stipulation constrains the flexibility to better meet the demand for capital of borrowers. 5. Interest rate 11 Impact assessment, Ky anh credit and saving program The interest rate currently charged by the project is 1.5%/ month, a reduction from 2% as it used to be at the initial period of the project. This rate is much higher than that offered by formal credit institutions operating in the district (VBARD is lending at 0.9 to 1.1%/ month and VBARD at 0.5%). The comparison by members between such interest rates is inenvitable. However, many member borrowers (55% of respondents) said that the interest rate charged by the project was reasonable and agreed that accessiblity to credit was more important than interest rate. Besides, the attractiveness of the project is not eclisped by the interest rate factor. This is proven by a high percentage of women?s union members joining credit and saving groups, e.g. the rate is 51% in Ky Phu, 24.3% in Ky Khang, 36.2% in Ky Long. In the district, usury still remains. Money-lenders often charge interest rates from 2% to 3.5% depending on the capacity of borrowers, loan term, the relations between borrowers and lenders... This is also a factor which has been taken into account by many borrowers when saying that the interest rate of 1.5% charged by the project is much more reasonable. The interest rate of 1.5% is not enough to ensure the financial sustainablity of the project since its scope is still limited. However, the increase to interest rate seems to be impossible given the competion from formal credit institutions and the low rate of return on economic activities of member households. Therefore, it is important to maintain this interest rate level and find other ways to improve the financical sustainablity fo the Project e.g. widening operation scope, improvment in efficiency, cost reductions... Recently, the State Bank of Vietnam has taken important steps in 5liberalizing the interest rate in both urban and rual areas. The ceiling interest rate mechanism has been removed and credit institutions now have the full autonomy in deciding their lending interest rates. Though not subject to credit regulation of the State Bank of Vietnam, credit activities of microfinance programs in general and of the project in particular are no longer chained by policy regulation in interest rates. This also presents a challenge to the Project, i.e. an increasing competition in interest rate from formal credit insitutions like VBARD, VBP, and PCFs. 6. Cash Management According to project regulation, when cash-in-hand at commune level exceed VND 2 million (for reasons like loan, interest collection), the amount should be deposited at banks (table 5). However, women?s union does not have a legal status, commune women?s unions therefore cannot open a bank account. Most of women?s unions had not had a safe and the unused cash is either 5 In August 2001, the State Bank of Vietnam has abolished the ceiling interest rate mechanism, shifting to prime rate mechanism. Under the new one, financial institutions could decide on their lending interest rates within a permitted band. In June 2002, the State Bank of Vietnam issued Decision No. 546/2002/QD-NHNN abolishing the band and allowing credit institutions to make loans at negotiated rates. 12 Impact assessment, Ky anh credit and saving program kept at the union?s office or at the account?s house. This represents a potential risks for the accountant in particular and for the Project in general. This issue should be soon addressed. Table 5: Cash in hand (as of 30 June 2001) Unit: thousand VND Ky Ky Ky Ky Ky Ky Ky ThuonKy Ky Ky Hoa Dong Hung Ninh Lam Long g Khang Phu Giang Project commences in: 11/97 01/00 10/98 08/99 01/01 01/99 04/99 09/99 01/02 01/00 Cash in 14.5315.0216.3111.4617.25 hand 2 2.865 7 7 4 0 2.258 4.742 5.408 Deposit at 20.00 bank 0 Table 5 indicates that most of the communes have cash – in – hand in excessive of the threshold allowed. At group level, the project has not issued a regulation on cash management. Interviews with group leaders disclose that cash is often managed by group leader and also the cashier and this fails to comply with the requirement on separating the function of an accountant and a cashier. It is therefore important that a deputy group leader is added to separate these two roles. III Savings Activities 1. Saving As designed, the project applies two kinds of savings, namely regular savings and voluntary savings. The amount of regular savings, required of the project, is 5,000VND/month, except volunteers of Ky Long commune deposit 10,000VND/ month. The main purpose of these savings is to create a saving habit for members. Regular savings are highly appreciated by women and considered to be an attractive value of the project. Voluntary savings constitute an important source for loans in several communes. With a low interest rate, which is 0.6%/month in comparison with 1% previously offered, and simple procedures of deposit, this kind of savings is attracting a considerable number of savings in many communes such as Ky Phu, Ky Dong and Ky Hung. The collected savings are sent by credit-savings group leaders to the Commune Board of Project. The Board is responsible for managing and using the savings for lending according to the common regulations. Besides these, some voluntary groups raise their members? contributions for the activities of their groups and making their uniforms. The amount of contribution, usually 1,000VND/month differs amongst groups depending on their economic conditions and activities in the communes. This 13 Impact assessment, Ky anh credit and saving program shows that women members are very conscious of saving and their activities. 2. Steady growth of mobilized savings As analyzed in the Part Figure 2: Mobilized savings growth from members of Results lending the (VND million) mobilized savings, the 500436.7total savings amount 400440.5accounts for 23% of the 300entire capital sponsored 235.6200by the project. This is a 10098.6great success of the 7.6 project. Figure 2 0 indicates that savings 19981999200020012002 have been increased quite sustainable in the recent Sources: Report of the Ky Anh Women?s Union years. According to the Report by Ky Anh Women?s Union, 3,351 members of the project deposited their savings up to 30 June 02. The mobilized savings were 455.5 million VND. The average saving was 136,000 VND/ person. 3. Savings mobilization is an important source for increasing outstanding loans Figure 2 also shows that during 5 years of implementing the project, the mobilized savings of the project members make up an increased percentage in the total outstanding loans. Up to 30 June 02, the total cumulative lending from savings in the entire project made up 1.66 billion VND, accounting for 23.7% of the total lending values of the whole project during 5 years. By 30 June 02, all the communes participating in the project mobilized savings and lent from these sources. The outstanding loans from savings accounted for a high proportion in the total outstanding loans in some communes such as 52.2% in Ky Phu, 44.4% in Ky Khang, 45.3% in Ky Hung, 33.9% in Ky Long (see Tables 6 & 7 below). These communes make their efforts in mobilizing sources for loans as well as in trying their best for higher level of financial sustainability. However, these communes disclose risks in management of financial assets (mobilized capital and loans) (see limitations below). Owing to the savings, 2,300 of the project members have borrowed from the mobilized savings to invest into business (accounting for 33% of the beneficiaries from credit 14 Impact assessment, Ky anh credit and saving program activities). This figure is very meaningful for a microfinance project. 4. Limitations One of the factors leading to a high rate of saving mobilization is a low interest rate of saving mobilization within the project: 0.6%/month in comparison to 0.2%/month in 6banks. In the past years, while banks have decreased interest rates many times, the level of interest rate of the project still maintains constantly. Therefore, many people wish voluntarily to deposit their savings into the project. Savings growth must be coupled with the enhanced ability of management and improvement of mechanism. Rapid increase of voluntary savings due to high interest rate, while lacking regulations on required reserves for payment (in case of unexpected withdrawals), may result in liquidity risks. Recently, outstanding loans from savings are much higher than the present mobilized savings (see Table 6). For example, such situation is observed in Ky Long, Ky Khang, Ky Lam, especially Ky Dong and Ky Phu. In these communes, deposits of savings are lower than outstanding loans from savings. Sources for compensating this difference are deprived from the growth fund, interests of savings and net profits. Due to the small size of performance, this issue of deficiency still is under control, so it does not cause serious problems in financial management in the communes. Nonetheless, this issue should be solved soon in order to avoid difficulties encountered by communes in the future. Cash-in-hand which has not been lent out is high as analyzed above, not affecting the liquidity ability. But, this issue prevents optimal use of the mobilized savings for loans. Therefore, it is necessary to detail regulations on amounts of savings, in which a certain level of voluntary savings is admitted, the required reserves rate for the liquidity ability is 20% and the interest rate of savings equals the interest rate of non-term deposits in the Vietnam Bank for Agriculture and Rural Development (VBARD) applied for these localities. Figure 3: Savings use situation in communes (30/6/02) 6 Assessment group compared this level of interest rate with non-term deposit interest rate in banks because by the nature these savings in the framework of the project are non-term deposits. According to the rule, members can withdraw their savings at any time and given short advance notice. 15 Impact assessment, Ky anh credit and saving program 300000 250000 200000D?n?chovay t?ti誸150000ki謒 huy ng100000T鎛g d?n 50000t輓 d鬾ghi謓 t筰0g,璶 K?HoaK?LongK?Giang K?HK?Th ng K?Ninh K?Khang K?уng K?Ph K?L 16 Impact assessment, Ky anh credit and saving program Table 6: Savings mobilization and use in communes (Up to 30/6/02) Units: 1000 VND Ky Hoa Kú Ky Ky Ky Ky Ky Ky Phu Kú L?m Ky Total H,ng Long Thuong Ninh Khang Dong Giang Regular savings 62,880 101,8044,215 81,550 53,362 87,335 127,22154,2540,500 6,120 605,143 0 7 4 Voluntary 4,028 savings Number of 355 220 256 360 340 334 460 655 218 130 3,328 depositors Outstanding 36,147 57,000 42,296 56,200 24,735 50,013 40,313 102,5040,365 6,120 455,694 savings 5 (subtracted withdrawals) Outstanding 33,870 57,001 47,395 30,200 23,650 58,360 71,567 134,3242,313 3,060 501,739 loans from 3 mobilized savings Difference 2,277 1 (5,0994,000 1,085 (8,347(31,25(31,81(1,9483,060 (46,045) between savings ) ) 4) 8) ) and lending from savings Current total 190,13125,81139,65105,81208,81131,45244,99257,46151,72107,201,663,062 outstanding 8 0 0 7 3 3 4 7 0 0 loans Outstanding 17,8% 45,3% 33,9% 28,5 11,4% 44,4% 29,1% 52,2 27,9% 2,8% 30,2% loans from mobilized savings /total outstanding loans Ratio Cumulative 207,23253,59192,71200,0369,400 159,36256,14276,3839,263 3,060 1,614,903 revenue from 5 3 0 5 0 0 8 savings when project starts in communes 17 Impact assessment, Ky anh credit and saving program Cumulative 265 358 236 270 179 560 228 410 102 6 2.314 number of members when project starts in communes Return ratio of 100% 100% 100% 98% 100% 100% 100% 100% 100% 100% 99,8% loans from savings Sources: Calculated from reports of the Ky Anh Women?s Union. 18 Impact assessment, Ky anh credit and saving program IV. Funds 1. Project fund Ky Anh credit-saving project is funded by Oxfam UK in Vietnam. This fund is transferred by Oxfam UK to the District Project Management Unit (DPMU). Depending on the needs of communes, the DPMU sends the money into their accounts and commune project boards will utilize this money for providing loans amongst members according to the project?s regulation. The total fund for 10 communes in Ky Anh district is 1,502,300,000 VND by 30 June 02, excluding costs on equipment and training. This is the main source that the communes can use for giving loans to members. Depending on the needs of each commune for credit, the source is divided into parts. Up to 30/6/02, the highest part of the fund was provided for Ky Dong commune, which was 250,000,000VND; the lowest part of the fund was 100,000,000 VND for Ky Hung commune (see Table 7). Cumulative lending values from the project fund in 10 communes by 30/6/02 reached more than 6,1 billion VND, i.e. four times higher than the initial Oxfam-funded capital. 2. Savings fund The savings funds managed by communes is aimed at providing loans for group members. Initially, savings funds are established through 5%-discount of loans that started from 1998 to June 2001. The amount of 5% discounts is combined with regular savings of the members. After 2 years of implementing the project, some commune Project Management Units fulfil repayments of regular savings to members. Gradually, the amount of savings withdrawn is very large (see Table 6). This results in the decrease of regular savings and stability of the project funds. A savings fund, which is constituted from regular savings and voluntary savings, and growth funds, is 33% of the interests from loans. The level of regular savings is 5,000VND/person/month, except for Ky Long 10,000VND/p/m. The savings fund is used to re-lend amongst group members. The group members decide to lend to whom members according to their urgent needs. Loans from the savings fund are worth of from 100.000VND to 300.000 VND with monthly interest payment, and principal repayment at the period of maturity. Short term of loans from credit funds usually is from 4 months to 6 months, their interest rate equal to the interest rate of the project fund. 19 Impact assessment, Ky anh credit and saving program 3. Group fund In some communes surveyed, a number of groups have the initiative to establish group funds with voluntary savings of 1.000VND/p/m. The money of group fund is in hands of the group leader and use for his/her group. Most of groups use the group funds for making their uniforms, organizing group functions, visiting the ill and for giving loans to some members who need urgently for treatment. 4. Loan loss provision fund and funds set up from interests collected Since July 2001, the credit-saving program has applied the ratio for allocating 1,5%/month interests from loans as follows: (i) 40% for administration and management costs of the commune, (ii) 17% for administration and management costs of the district; (iii) 5% for loan loss provision; (iv) 33% for the growth fund and (v) 5% for the reward fund. The loan loss provision fund is set up by deducting 5% of the loan interests (see Table of analysis of financial sustainability of the project). This proportion of 5% is observed by communes and the fund is under management of the district Project Management Unit. In the early 6 months of 2002, the total money of loan loss provision collected from communes was 6.546 million VND, accounting just for 0.4% of the total outstanding loans, or 0.8% of the annual outstanding loans. This figure might be reasonable in the context of the high repayment rate is high these days, but it is too low in comparison with normal rates, not meeting the level of efficient prevention of risks. The loan loss provision from the project fund was established in 1997 when the project started, up to 30 June 2002, it made up 53.210.810 VND. After clearing bad debts of some members, the outstanding balance of the fund, reported by the Ky Anh Women?s Union, remained 43.873.920 VND, accounting for 2,7% of the present outstanding loans from the project fund. This figure exceeded the normal limit. However, Table 8 Loan loss provision also indicates that this figure is low in three communes namely Ky Dong, Ky Lam and Ky Thuong (except for new Ky Giang commune) so the interest is less than others. The project also derives from the loan loss provision to provision of loans with the interest rate of 0,3%. By 30/6/02, the loan loss provision from savings was 13.992.295 VND, accounting for 2,78% of the present outstanding loans from savings. 20 Impact assessment, Ky anh credit and saving program Hence, given the present rate of loan loss provision derivation and 99% of the annual repayment rate, the project can be compensated, but it is needed to take into account a situation in which „one project? is terminated when it is transferred to the management of local authorities in terms of capital and in such situation, lending costs and bad debts are always higher than its revenue” (Adam McCarty- Microfinance in Vietnam, 4/02). So, the minimum level of loan loss provision derivation should be raised up to 2% of the outstanding loans. 5. Growth fund The growth fund of commune is built from 33% of the loan interests in the commune. This fund is kept in the commune and added to the sources for activities and maintaining the capital sustainability. In the scope of the district, the rate of growth fund in the early 6 months of 2002 was 2.7%, equivalent to 5.4% per annum of the total outstanding loans. Meanwhile, the average inflation rate of that period was 7about 3% annually. Therefore, with the above rate of derivation, the project can maintain its capital against devaluation of the currency caused by inflation, and gains the annual rate of growth of 2.4%. This is one of the achievements few projects could gain. According to the analysis of the project?s sustainability in the communes, when the loan loss provision is derived from 2% from the total outstanding loans will shrink the size of the growth fund. 6. Reward fund The reward fund is derived 5% from the monthly loan interests in all the communes. These days, this fund is sent to the Ky Anh Women?s Union. From this fund, the program carried out a year-end summation of 2001 in order to reward and encourage women members to join actively in the program functions. Selecting nominees for rewards is discussed openly amongst women according to certain criteria such as adequacy in principal and interest payment, maturity of payment, adequacy in regular savings and active participation of group?s activities. The reward fund encouraged and mobilised the commune Project Management Units, the district Project Management Unit and staff of the project. Table 7: Oxfam-funded project fund for credit activities (up to 30 June 02) CummuneTurnover Current OutstandiOxfam UK Repayment s of loans outstanding ng loans/ fundings to district in loans of Oxfam 7 State Bank of Vietnam's Report 21 Impact assessment, Ky anh credit and saving program communes members funding 152,000,001,047,505, 125,09% Ky Hoa 0 000 190,138,000 98,00% Ky Dong 250,000,00829,650,00244,994,000 0 0 124,19% Ky Hung 100,000,00979,950,00124,190,000 0 0 114,11% Ky Ninh 183,000,00738,100,00208,813,000 0 0 101,15% Ky Lam 150,000,00314,300,00 0 0 151,720,000 118,000,00823,100,00 118,35% Ky Long 0 0 139,650,000 107,98% Ky 120,000,0022,000,000 491,400,00105,817,600 Thuong 0 0 Ky 125,000,00697,100,00 110,10% Khang 0 0 137,623,000 111,17% Ky Phu 197,100,00 107,100,00219,120,000 0 0 100,00% Ky 107,200,00 107,200,00107,200,000 Giang 0 0 1,502,300,6,135,405,1,629,265,6Total 22,000,000 108,45% 000 000 00 Table 8: Loan loss provision (up to 30 June 02) Communes Starti12/31/112/31/1912/31/212/31/212/31/2Total ng 998 99 000 001 002 time 1,370,003,005,02,732,08,456,0Ky Hoa 11/97 519,000 0 00 00 830,000 00 Ky Dong 2,255,02,710,0889,000 5,854,0 01/00 00 00 00 Ky Hung 10/98 1,367,912,260,01,647,0542,000 5,816,9 0 00 00 10 Ky Ninh 3,100,52,298,0973,000 6,371,5 08/99 00 00 00 Ky Lam 01/01 551,000 1,419,0 868,000 00 1,580,003,098,02,210,07,585,0 Ky Long 01/99 0 00 00 697,000 00 Ky 04/99 618,000 2,475,01,755,0416,000 5,264,0 Thuong 00 00 00 Ky Khang 09/99 2,962,01,892,0591,500 5,445,5 00 00 00 Ky Phu 01/00 2,562,03,379,91,057,06,998,9 00 00 00 00 Ky Giang 01/02 0 4,935,9121,717,19,491,6,546,553,210,Total 519,000 0 500 900 00 810 Sources: Ky Anh Project Management Unit According to Ky Anh Project Management Unit, the outstanding of loan loss provision on 30-6-2002 was 43,873,920VND 22 Impact assessment, Ky anh credit and saving program VI. Monitoring and assessment 1. Book-keeping Bookkeeping system: the project applies a bookkeeping and report system in order to monitor credit-saving activities from members, groups, commune Project Management Units to district Project Management Unit (see Table 9). 23 Impact assessment, Ky anh credit and saving program Table 9: Bookkeeping system for the project No Book names Manager/ managemnt unit 1 Savings book Member 2 Loan credit and savings book Leader/commune accountant 3a Cash book (designed by the project) Commune 3b Cash book (issued by the Ministry of District Finance) 4 Loan book Commune 5 Credit interest allocation book Commune 6 Savings interest allocation book Commune 7 Cost of project commune board book Commune 8 Fixed assets book Commune /District 9 Group meetings book Group leader 10 General report Commune/ District 11 Cost revenue report Commune/District 12 Balance sheet Commune/District Sources : Ky Anh Project Management Unit Presently, the commune Project Management Unit and district Project Management Unit themselves can make cost-revenue reports and balance sheets. This is a great effort which is rarely seen in other credit-saving projects. These financial reports help the Project Management Unit and sponsors control and analyse data, then make decisions for appropriate adjustments. However, there are some issues that need further improvement, these issues in detail will be examined below. Forms of bookkeeping: forms of bookkeeping in communes are formatted in large-sized papers which is difficult for accountants to write down the books and monitor data. Forms of bookkeeping in communes are designed not adequately, so looking up needed information takes accountants a number of time. Large-sized bookkeeping result in users folding them many times when entering information. This is not really convenient for local book keepers. Book 1: Membership book used for monitoring regular savings without loan activities and repayment. Regular savings book Column Is there savings withdrawal? Column Is there outstanding regular savings? Column Sum up, including/excluding regular savings and voluntary savings? Book 3: Cash book Communes use the cash book designed by the project. District uses cash book issued by the Ministry of Finance and a supplementary book for monitoring costs in the district without comparison with the bank?s balance. Book 8: Fixed assets book 24 Impact assessment, Ky anh credit and saving program District/page number, commune/page number. There is no monitoring of fixed assets of the whole project. District has fixed assets book detailing situations of each commune in certain pages. However, there is no general report on the usage and assessment of fixed assets over the whole district. Book 9: group meetings book District conducts a pilot form of this book and gives it to one commune to use. The rest of the communes have to design group meetings books by hand in order to save administrative costs. It is the thing that reminds the leader of groups that recording minutes of meetings is necessarily compulsory. Book 11: cost-revenue report and balance sheet The form of balance sheet does not meet the accounting standards. Data in the balance sheet and cost-revenue report is not related. Some funds are shown in the cost-revenue report but not in the balance sheet such as loan loss provision, reward fund, and group welfare fund. Meanwhile, according the approach of CGAP, loan loss provision is managed and shown in the balance sheet and in the Overdue Loans in order to ensure the efficient safety of 8credit activities. 2. Information system Due to the change in managerial staffs at the commune level, information is not updated for archives, so it takes a lot of time to look up the needed information. During the field trip, group of consultants spent much time on processing information collected from the project?s data. The information system is inconsistent. Overdue loans are shown in credit reports, but the practice of the project does not follow overdue loans, delayed payment and interest payment…. So, the project is required to restructure outstanding loans in terms of maturity in order for the management of overdue loans to become more efficient. According to the data of the Project Management Unit, the rate of return is high (99,2%), especially there is no overdue interest. However, when data are analyzed, the consultant team find that there exist differences between the really collected interests and the interests which fall due 88 Microfinance handbook, Joana Ledgerwood, WB, 1999 – published in Vietnamese 2001 25 Impact assessment, Ky anh credit and saving program in a period of time, for example during 6 months of 2002 (due interests are calculated on the basis of 1,5%/m of the total 9outstanding loans on 30/6/02). This shows that the interest earned in that period includes revenues compensating for the delayed payment previous months and debts (see the Table of financial sustainability analysis). According to international practices, if a borrower delays the payment of a loan installment for one day, the all delayed debt will calculated as overdue loans. VIi. Sustainability of the project Poverty reduction programs have to improved in different ways so as the living standard of the poor is enhanced efficiently in larger scale. Amenomori (1993) pointed out three main requirements to gain this purpose: i) establishment of structure capable of providing sustainable services for the poorest; ii) achievement of long-term sustainability; and iii) extending access of larger number of the poorest to the programs. CGAP also claims that the sustainability of a microfinance project is examined in three factors: i) sustainability in finance; ii) sustainability in institution; and iii) sustainability in capital sources. This section will focus on discussing levels and ability of project sustainability according the above approach. 1. Financial sustainability In analyzing financial sustainability of a microfinance project, CGAP and WB put forward four levels as follows: , Level 1: program is mainly subsidized, favored loans and subsidized price for covering costs of activities and increasing the capital base. Up to now, about 90% of microfinance institutions over the world operate at this level. , Level 2: programs are still subsidized partly but mobilization of capital is carried out through borrowing with interest rate lower than market interest rate. Interest revenue is enough to cover capital costs. Lending interest rate is equal to commercial interest rate. , Level 3: programs are mostly freed from subsidization and operate on larger scale. , Level 4: Programs operate on the base of market interest rate, profitably and institutionally sustainable. 9 The method of interest calculation used by the project is that the total loans is multiplied by 1.5% for the initial two months, for the following months the level of interest rate will decline. 26 Impact assessment, Ky anh credit and saving program According to CGAP and WB, a microfinance program needs at least three years to cover performance costs with loan interest. However, branches of Grameen bank grew sustainable 10in the sixth year or seventh year; the model of TYM also reached its sustainability in the fifth year (Aires Alip). This depends on the way of designing programs. Commonly, a plan for financial sustainability is calculated in relation to members? plan and disbursement plan of project. Doing so will ensure long term sustainability of programs. The Ky Anh credit-saving project has begun since 1998 in selected communes, except for Ky Giang that started in 2002. So, all the communes are eligible to analyze with this methodology when analyzing levels of sustainability of the project. The Ky Anh credit-saving project has applied sustainable self-financing method since the project started with the interest rate of 2%/m. Due to the pressure of decrease in interest rate by formal financial institutions, the lending interest rate of the project is decided by the whole project seminar to reduce to 1.5%/m and effective from July 2001. With this interest rate, the project can cover just activity costs within communes. Costs for equipment and training project staffs and members are completely financed by Oxfam UK. Table of financial sustainability analysis below indicates that communes self balance their costs at a low level. Compensation for commune managerial staffs ranges from 50,000 11to 70,000VND/p/m depending on their positions. This level does not ensure the financial sustainability of the project. As analyzed in Part IV, the loan loss provision in communes within the early 6 months of 2002 was only 0.4% of the outstanding loans while the minimum level of loan loss provision must be 2%. However, these days the loan loss provision of the project makes up 2.7% the outstanding loans from the project fund managed by district Project Management Unit. In giving loans from savings, the project also established a loan loss provision from the source of 0.3% of interest earned from savings. This savings for loan loss provision is controlled by the commune Project Management Unit, and it is 13,992,295 VND accounting for 2.78% of the present outstanding loans and 3.48% of the outstanding loans 10 TYM is the credit-saving model conducted in Soc Son, Hanoi, and managed by the Women’s Union, applying the approach of Grameen Bank since 1994 in Vietnam. 11 The People's Credit Fund in Ky Lac and Ky Anh pays an average salary of 300,000 VND/P/M. 27 Impact assessment, Ky anh credit and saving program from savings after the savings are deducted by 20% for ensuring the liquidity ability. Given a low level of income, the administrative cost containing 40% of the income is high because of small size of performance. In order to ensure cost coverage by income and achieve the minimum level of loan loss provision derivation and maintain sustainable growth, it is necessary to adjust the allocation rate of costs. Using the CGAP approach, the level of financial sustainability of the Ky Anh project is assessed low in terms of income and cost. The groups of consultants put forward a table of the break-even point analysis in three cases of the project. (See Appendix 3). According to the estimation of costs presently, three schemes to reach the break-even point will be examined below: Scheme 1: credit-savings in one commune reach the break-even point when outstanding loans are approximately 177,000.000 VND. There are some assumptions for this: 300 members in the commune, loan loss provision consisting of 2% of the outstanding loans, constant administrative cost of 300,000VND/m, pay of 180,000 VND for three staffs from Women?s Union (currently, communes pay 50,000-70,000/p/m), compensation for 30 group leaders (10,000VND/p/m) and 30 vice leaders (5,000VND/p/m). Administrative cost for communes is 900,000 VND/m, i.e. 4,500,000 VND for 6 months accounting for 33.9% of the 6-month incomes. According to this scheme, 6 communes can ensure 20% reserves for savings fund, maintain financial sustainability such as Ky Hoa, Ky Dong, Ky Ninh, Ky Khang, Ky Long and Ky Phu. The remaining four communes do not reach this scheme. However, in Ky Phu the administrative cost of 6,436,000 VND/6 months in 2002 was much higher than the administrative cost at the break-even point. Scheme 2: the break even point is at 144,000,000 VND of outstanding loans with the following assumptions: 300 commune members, loan loss provision consisting of 2% of the outstanding loans, constant administrative cost of 250,000VND/m, pay of 180,000 VND for three staffs from Women?s Union ( currently, communes pay 50,000-70,000/p/m), compensation for 30 group leaders (10,000VND/p/m). Administrative cost for communes is 730,000 VND/m, i.e. 4,380,000 VND for 6 months accounting for 27.5% of the 6-month incomes. According to this scheme, 8 communes have enough incomes to cover their costs such as Ky Hoa, Ky Dong, Ky Ninh, Ky Khang, Ky Long, Ky Lam, Ky Hung and Ky Phu. during the early 6 months of 2002, alone Ky Long had the level of income higher than that of cost at the break-even point, the level of real income was higher than that of expected income based on outstanding loans. This justifies that income includes revenue from delayed payments. Two 28 Impact assessment, Ky anh credit and saving program communes Ky Thuong and Ky Giang did not reach this scheme at the beginning of 2002. Scheme 3: group leaders and deputy leaders rotate amongst group members, so monthly compensation is not needed, administrative cost estimated (450,000VND i.e. 2,700,000/6 months) will reduce by 50% in comparison to the scheme 1 or 40% to scheme 2 and 39% to the average administrative cost through the district. The outstanding loans are 90,000,000 VND/commune. According to this scheme, all the communes have enough income to maintain financial sustainability. Hence, tightly controlled administrative cost will help the project achieve financial sustainability at a higher level (see Table 10 and Appendix 3). 29 Impact assessment, Ky anh credit and saving program Table 10: Financial sustainability analysis according to revenue-cost, up to 30/6/021 Ky Ky Ky Ky Total Ky Hoa Ky Dong Ky Hung Ninh Ky Lam Ky Long Thuong Khang Ky Phu Giang Starting time of project Nov-97 Jan-00 Oct-98 Aug-99 Jan-01 Jan-99 Apr-99 Sep-99 Jan-02 Jan-02 3,351 1. Number of members 355 460 220 340 218 256 360 334 655 153 2. Number of leaders 210 13 38 4 26 20 25 36 34 60 15 3. Number of Union?s staff in charge of project 24 4 2 3 3 3 3 3 3 2 1 1. Sources (1000VND) 197,10 1,502,300 a. Oxfam funding 152,000 250,000 100,000 183,000 150,000 118,000 120,000 125,000 0 107,200 b. Repayment to district 22,000 22,000 1,047,5 107,106,135,405 c. Accumulated lending at communes 05 829,650 979,950 738,100 314,300 823,100 491,400 697,100 0 107,200 2. Equipment and training cost (1000VND) a. Equipment 32,464 b. Training in communes and district 540,603 66,585 573,067 c. Total 66,585 3A. Credits for current activities (1000VND) Ky Ky Ky Ky Ky Total Ky Hoa Ky Dong Hung Ninh Ky Lam Ky Long Thuong Khang Ky Phu Giang 1,629,265 .6 Outstanding project fund 190,138 244,994 124,190 208,813 151,720 139,650 105,817 137,623 219,120 107,200 Outstanding savings 501,739 33,870 71,567 57,001 23,650 42,313 47,395 30,200 58,360 134,323 3,060 Total 2,131,004224,008 316,561 181,191 232,463 194,033 187,045 136,017195,983 353,443 110,260 ,6 .6 Outstanding loans from savings/total 23.5% 15.1% 22.6% 31.5% 10.2% 21.8% 25.3% 22.2% 29.8% 38.0% 2.8% outstanding loans 131,114,316,696.17,781.10,856.19,473.11,032.13,957.21,148.Interest of project fund 85 2 6 9 .8 15 6 8,337.6 11,830 5 Interest of loans from savings 3,808.1 (estimated) 45,156.5 3,048.3 6,441 5,130.1 2,128.5 7 4,265.5 2,718 5,252.4 12,089 275.4 176,270,819,744,24,222,15,986,21,602,14,840,18,223,11,055,17,082,33,237,Total interest 95 500 630 990 300 320 150 600 400 605 275,400 Cost 39,252,005,180,05,027,03,370,04,114,02,676,04,373,04,054,04,022,06,436,0a. Commune administrative cost 0 00 00 00 00 00 00 00 00 00 30 Impact assessment, Ky anh credit and saving program Estimated wages/ Commune administrative cost 61.9% 52.1% 53.7% 80.1% 65.6% 100.9% 61.7% 66.6% 67.1% 42.0% 1,057,0b. Rewards 6,554,300 834,000 889,000 542,000 973,000 554,000 697,000 416,800 591,500 00 24,225,002,838,03,022,01,845,03,310,01,815,02,372,01,417,02,011,05,595,0c. Repayment to district 0 00 00 00 00 00 00 00 00 00 43,483,005,500,05,867,03,582,06,426,03,640,04,606,02,151,04,732,06,979,0d. Growth fund 0 00 00 00 00 00 00 00 00 00 * Growth fund / total outstanding loans 2.04% 2.46% 1.85% 1.98% 2.76% 1.88% 2.46% 1.58% 2.41% 1.97% 0.00% 1,057,0e. Loan loss provision 6,546,500 830,000 889,000 542,000 973,000 551,000 697,000 416,000 591,500 00 * Loan loss provision / total outstanding loans 0.31% 0.37% 0.28% 0.30% 0.42% 0.28% 0.37% 0.31% 0.30% 0.30% 0.00% 120,060,815,182,15,694,9,881,015,796,9,236,012,745,8,454,811,948,21,124,Total cost 06 001 001 01 001 01 001 01 001 000 0 56,210,084,562,48,528,66,105,95,806,25,604,35,478,12,600,75,134,312,113,Net revenue 9 99 29 89 99 19 49 99 99 605 275,400 3B. Credits for current activities, subtracted 20% for savings reserves (1000VND) Ky Ky Ky Ky Ky Total Ky Hoa Ky Dong Hung Ninh Ky Lam Ky Long Thuong Khang Ky Phu Giang 1,629,265Project fund 105,817.6 190,138 244,994 124,190 208,813 151,720 139,650 .6 137,623 219,120 107,200 Outstanding loans from savings 501,739 33,870 71,567 57,001 23,650 42,313 47,395 30,200 58,360 134,323 3,060 Outstanding loans from savings 401,391,2 27,096 57,253.45,600.18,920 33,850.37,916 24,160 46,688 107,4582,448 subtacted 20% for reserves 6 8 4 .4 Total outstanding loans 2,030,656217,234 302,247169,790227,733 185.570177,566 129,977184,311 326,578109,648 .8 .6 .8 ,4 .6 .4 Outstanding loans from savings/total 19.8% 12.5% 18.9% 26.9% 8.3% 18.2% 21.4% 18.6% 25.3% 32.9% 2.2% outstanding loans 131.114,316,696.17,781.10,856.19,473.11,032.13,957.21,148.Interest of project fund 85 2 6 9 8 15 6 8,337.6 11,830 5 Interest of loans from savings 36,125,202,438.65,152,84,104,03,046,53,412.44,201.99,671,2(estimated) 8 4 24 72 1,702.8 36 4 2,174.4 2 56 220,32 167,239,519,134.22,934,14,960,21,176.14,078,17,370.16,031.30,819.Total interest 93 84 424 972 6 686 04 10,512 92 791 220.32 Cost a. Commune administrative cost 39,252 5,180 5,027 3,370 4,114 2,676 4,373 4,054 4,022 6,436 Estimated wages/ Commune administrative cost 61.9% 52.1% 53.7% 80.1% 65.6% 100.9% 61.7% 66.6% 67.1% 42.0% 31 Impact assessment, Ky anh credit and saving program b. Rewards 6,554.3 834 889 542 973 554 697 416.8 591.5 1,057 c. Repayment to district 24,225 2,838 3,022 1,845 3,310 1,815 2,372 1,417 2,011 5,595 d. Growth fund 43,483 5,500 5,867 3,582 6,426 3,640 4,606 2,151 4,732 6,979 * Growth fund / total outstanding loans 2.14% 2.53% 1.94% 2.11% 2.82% 1.96% 2.59% 1.65% 2.57% 2.14% 0.00% e. Loan loss provision 6,546.5 830 889 542 973 551 697 416 591.5 1,057 * Loan loss provision / total outstanding loans 0.32% 0.38% 0.29% 0.32% 0.43% 0.30% 0.39% 0.32% 0.32% 0.32% 0.00% 120,06,8015,182,15,694,9,881,015,796,9,236,012,745,8,454,811,948,Total cost 6 001 001 01 001 01 001 01 001 21,124 0 47,178,783,952,87,240,45,079,95,380,54,842,64,625,02,057,14,083,99,695,7Net revenue 7 39 23 71 99 85 39 99 19 91 220,320 Sources: Ky Anh Project Management Unit and group of consultants Assumption: all the items of cost are calculated based on the current report of the Ky Anh Project Management Unit. Interest rate of savings is based on the outstanding loans from savings of communes and the current rate of 1.5%/m 32 Impact assessment, Ky anh credit and saving program 2. Institutional sustainability In which institutional framework models of credit-savings fit in is the question raised for both sponsors and implementers of project. Credit-savings models are not effected by the current Law of credit organizations, so this might be an advantage that these models are more flexible in meeting microfinance needs for the poor. As a result, a number of credit-savings programs in Ky Anh have rapidly increased in the recent years. Nonetheless, due to not belonging to any legal framework, this model is difficult to develop and expand their size. So it hardly achieves the sustainability of level 2 according to the standards of CGAP, i.e. the model of cost coverage and capital mobilization by borrowing. Therefore, institutionalization is certainly necessary to develop a sustainable model. Maybe, the Notice by the Prime Minister on permitting the Women?s Union to maintain small-sized credit-savings models is the preliminary legal basis for credit-savings organizations to perform until a clearer legal framework for 12microfinance development in Vietnam is established. There is other alternative that in reality the project raised. It is experimentation that a credit-saving model in a commune is transferred into a people?s credit fund. Perhaps, this is the closest model to the way that credit –savings projects operate recently. In Ky Anh, two people?s credit fund operated, one of these (Ky Lac) was very successful. If the experiment is successful, some lessons will be drawn for further development of people?s credit funds. 3. Resource sustainability Resource sustainability is mentioned if projects can raise their capital themselves by borrowing from outside in order to meet their increased needs. As analyzed in the part of savings mobilization, savings mobilization is limited with the scope of the project (because of liquidity and savings management…). According to the regulation by the state bank, credit-savings organizations are not allowed to mobilize savings from outside. As a result, it is difficult for the project to attract capital from outside. Besides this, the Law of credit organizations stipulates that credit projects do not borrow capital from other financial institutions. 12 ADB is funding the state bank of Vietnam to build the framework for microfinance development in Vietnam (technical assistance Number TA-3741-VIE). This project started implement in June 2002 and expected to complete in June 2003. More details see at website: www.microfinance.org.vn 33 Impact assessment, Ky anh credit and saving program Hence, opportunities to mobilize capital from others for lending are impossible. Other opportunity of the Ky Anh credit-savings project is incorporating with the IFAD-funded project that the VBARD implements in the locality. However, this opportunity is under discussion. Therefore, while waiting for other borrowing opportunities, Oxfam UK should add more capital to the communes that have their outstanding loans lower than that at the break-even point as analyzed in the Financial sustainability. VIII. Training 1. Training modes Training is carried out through short-term full-time training. District staffs are sent to be trained at training centers, then those trained staffs retrain commune staff through classes organized by district. This on-spot training mode of trainers for all the communes is consistently applied through the project. It helps save training costs and train a large number of trainers. The district staff are capable of organizing another classes for training commune staff. 2. The contents of training Training programs for district and commune staff, and participants of the project consist of profound contents: project management skills, communication skills, community development, project assessment, accounting…(see Table 11). However, these programs are mainly focussed on district project management staff (49 persons from the district level against 56 persons from the commune level participated in training). Training commune staff (group leaders and members) is limited, especially community development and communication skills. Therefore, the project should pay more attention to training community development, communication skills and group union. All the participants of the programs are trained about the mechanism and regulation on credit and savings activities of the project before borrowing. It help them understand clearly the mechanism and requirements of the project?s credit- savings activities. 3. Training materials 34 Impact assessment, Ky anh credit and saving program Table 11: Training activities for district and commune staff OverTotaKy Ky Ky Ky all l Ky Ky Ky Ky Ky Ky Training courses LonThuonKhanGiandistcommHoa Dong Hung Ninh Lam Phu g g g g rict unes Community development 5 9 3 3 3 Training of members 6 7 1 1 1 1 1 1 1 Communication skills 7 6 1 1 1 1 1 1 Designing and planning project 7 4 1 1 1 1 Project management 7 9 1 1 1 1 1 1 1 1 1 Logframe 1 0 Project assessment 3 3 1 1 1 Accounting 3 13 1 1 1 1 1 1 2 1 2 Microfinance management 2 0 Designing credit programs 4 3 1 1 1 Agricultural sustainability 1 0 Making books 3 2 1 1 Total 49 56 The Ky Anh Women?s Union makes a great effort to compile materials for training. The materials are rearranged from the training materials for district project management staff. This shows that district project management staff have a high level of independence in conducting the project. Some training materials are already compiled such as project management skills for district and commune management boards, community development and gender training. However, training programs for group leaders and participants of the project do not have enough materials. District trainers train group leaders and participants using only handwriting scripts and some printouts on project. This may lead to the fact that the trainers give insufficient and inconsistent information to trainees, and the trainees do not have enough materials for reading while learning, and looking up if necessary. In conclusion, one of the necessary tasks in the coming time is that the project should finance to compile training handbooks for the project stakeholders. IX. Organisation and human resources 1. Organization 35 Impact assessment, Ky anh credit and saving program Activities of the credit-savings project are based on the organizational structure that is existing in the Ky Anh Women?s Union. The management structure is demonstrated in the following chart: Chart 3: Diagram of Ky Anh credit project organization, Ha Tinh province ky Anh Women’s union 10 CPMU CPMU CMPU communes 327 group group group group group group Groups Women's union members participating in credit-savings groups (3.351 members up to 30/6/2002,) The above organizational structure shows that the activity of the project managed by the Women?s Union and Oxfam UK. The Oxfam UK is the sponsor providing assistance of technical and management skills. This structure creates the flexibility and the sense of initiative for the partners in implementing the project. The project is managed through two layers: district and commune levels. The commune level has conducted a considerable number of specific tasks such as disbursement, savings management, commune management of funds, making reports…The district level takes responsibility for management of growth funds, loan loss provision, reward fund, monitoring and making general reports…So, devolution of power to commune level occurs more strongly than (several years ago) previously. In the future, when the capability of the commune management project board improves, the district level plays only a role in monitoring the project. The structure based on the existing network of the Women?s Union as the above assists the project save managerial cost 36 Impact assessment, Ky anh credit and saving program 13and integrate with other development programs which are being conducted. Through this integration, beneficiaries can gain the maximum impacts from different projects. On the contrary, amateurism of the Women?s Union in credit-savings activities also affects adversely the role of the sustainable growth of the project. Considering the current context, when there is the lack of legal framework for microfinance, the above management structure is compact and adequate for local conditions and this organizational structure may extend largely to other localities where there are similar projects. Though not being a part of the organizational structure, the project initially has an initiative to integrate with formal financial institutions such as VBARD, people?s credit fund, the state bank… which operate in the locality. In the prospective time, the integration of the project with formal financial institutions should be strengthened in order to facilitate the stakeholders to get access to services of these institutions for borrowing. 2. Human resources At the level of district there are four staffs joining the project management, of which two are specialized. Owing to personal attempts and training programs given by the project, level of district project management staffs is improved considerably. These days, they can manage and monitor most activities of the project. If there are a clear transfer plan and further improved capability of staffs, especially in planning and monitoring project, they will be able to self-manage the project when Oxfam UK terminates funding. The commune Project Management Unit operates as semi-specialized, which is appropriate for the tasks and the size of the project once these communes still do not need specialized personnel. The capability of commune staffs depends on their duration of time that they join the project. Those, who are have worked for the project for a long time, have usually more experience in work. Those who are new to the work need to trained due to the lack of skills. Meantime, a change in commune project personnel relies upon a change of The Women?s Union personnel, who have their two-year term. This is one of the disadvantages for this model. Changing personnel will increase cost because of training new ones. 13 The Women’s Union is deploying five major programs: virtue and capability training for women, economic development assistance for women; decent, equal and happy family building; strong Women’s Union building; making and monitoring equality gender policies. 37 Impact assessment, Ky anh credit and saving program The sustainability of the project mainly depends on the stability of staffs at all the levels. Therefore, the Women?s Union should build a strategic human resource plan for the project. Not only are commune staffs changed, Oxfam UK also has changed four times its personnel who are in charge of Ky Anh project. This issue certainly affects the performance of the project. X. Impacts of the project This analysis primarily addresses impacts of the project on three areas as follows: (i) impact on borrowers; (ii) impact on the Ky Anh Women?s Union; and (iii) impact on the community. Microfinance activity is considered a useful tool for changing the life of the poor over the world. Impacts of microfinance upon borrowers are examined from aspects such as income, assets, living quality, confidence, prestige in the community…In general, the relationship between microfinance and socio-economic conditions of households is shown briefly in Chart 4. This approach has been used by many famous researchers around the world to assess impacts of financial services on borrowers and this approach is suitable for developing countries, as Vietnam. This approach is also applied to assess impacts of credit-savings projects on beneficiaries. 38 Impact assessment, Ky anh credit and saving program Chart 4: Impacts of the project on borrowers outcome Impacts on living of members’ families Production investment Microfinance funding programs- Understanding investment Incomes opportunities - Improving imvestment - High, stable and diversified ability/expanding rpoduction and incomes business activities; credit - Improving capability through advanced skills and technology - Diversifying investment activities Production and - Encouraging morale in business risks investment activities - Increasing profitability savings - Nguån lùc ?,îc sö dông hiÖu qu? h?n Consumption/ living improvement Household expenditures - Allowing for more consumption Group - Increasing to purchase useful assets - Increasing household spending training - Reducing pressure on selling - Balancing incomes with household assets regular expenditures - Generating incomes from savings deposit - Developing household economy - Improving resource allocation Social Improving the role of women society activities - Enhancing social and economic - Poverty and huger reduction knowledge - better education of children. - Strengthening autonomy - Improving capacity of individuals - Improving status(in family and - Improving social status society) - minimizing risks and bad - Mental living improvement through impacts improved social activities - other social impacts - Better care for children Dependence to high interest loans- Sources: reducing dependence to informal loans www.virtuallibrary.c o 40 m Impact assessment, Ky anh credit and saving program A. Impacts to households 1. Improved outreach to the poor Lack of collateral resulted in a limited access of the poor to formal credit and they therefore have to approach loans from money-lenders. Many of them have to sell un-harvested rice at low price so their net come is so small. The project was aimed to provide credit to about 80% of total poor households. As the end of June 2002, there were 3,056 poor households in 10 communes borrowing loans from the project or account for about 73% of total poor households in the project areas. Even though, this figure is higher than those borrowing from the Bank for the poor (2,638) (Table 12), which showed a great effort of the project. Table 12: Lending activities of some financial institutions and the project in Ky Anh district Outstanding loans Overdue loans Total borrowers TotaPoor (VND million) (VND million Commune l HHs ProjeProjecProjeHHs VBA VBP VBA VBP VBA VBP ct t ct Ky Hoa 952 469 166 302 371 773 983.7 190.1 0.7 3.5 0 Ky Hung 413 134 45 160 220 184 422.9 125.8 4.8 14.0 8 Ky Long 753 301 271 112 232 755 199.6 139.7 20.3 60.0 4 Ky 1242 466 80 521 340 263 1140.105.8 7.4 Thuong 1 Ky Ninh 1395 770 291 441 312 1041 920.7 208.8 2 0 Ky 2135 577 813 177 312 3949 231.7 131.5 24 0 Khang Ky Dong 1110 255 223 189 420 1390 583.8 245 61 0 Ky Phu 1954 560 311 283 549 1865 487.6 257.5 124 58 0 Ky Lam 875 396 250 195 198 790 357.2 151.7 1.6 0 Ky 1342 248 394 258 102 2064 561.5 107.2 2 0 Giang Total 12,14,172,844 2,638 3,056 13,07 5,8881,663.240.0 7.4 71 6 4 .8 1 Source: VBARD, VBP and Ky Anh Women Union Average loan size of VBP: VND 2. 23 million 2. Significant contribution to poverty alleviation in local areas Poverty alleviation has been released as a priority program of the Vietnam government. Vietnam determined to fulfill its poverty alleviation program by the end of 2010. To achieve this objective, the Government has implemented various programs, under which credit is considered one of the important tools (Dao Hung, 1999). The project has focused on credit delivery as well as improve the partners and the Poor?s capacity. This approach has brought a significant contribution to poverty alleviation in Ky Anh district “ We highly appreciate the project?s approach in general and credit and savings program in particularly, which has enabled the 41 Impact assessment, Ky anh credit and saving program poor access credit and alleviated poverty in our local areas” Mr. Duy - Secretary of Ky Anh communist party. Figure 4 : Poverty status of the Figure 5: Current poverty status of the members at beginning of the project members HungryHungry12%5% PoorMiddleTrung 34%49%譶h & b猲 TBtrPoor61%39% Nguån: Kh?o s?t cña HLHPN Kú Anh Nguån: Kh?o s?t thùc ?Þa cña Nhãm T, vÊn The survey?s results showed that Figure 6: Customers by time of borrowing number of the hungry households from the project reduced from 12% to 5% while the poor households reduced from 39% to 2 l莕3 l莕34% (Figures 4, 5). Some households become better-off and they are no longer the project?s target beneficiaries. This is clearly 4 l莕 reflected in the communes which have 5 l莕implemented the project for a long 1 l莕 time: Ky Hoa, Ky Phu, Ky Ninh... . Source: Field trips Provided that the consultant team has tried to work out the project?s impacts by other factors but it could not conclude that all these changes are because of the project. 3. The members have accessed the project?s fund for their production diversification and re-structure Most of the borrowers have Figure 7: Member classification by major realized farming as their economic activities major income-earning activity. OthersThu?s秐85.2% of total interviewees Raisingunder the survey agreed that Servicesplantation and raising are their major economic activities while only small Small Bus. proportion (14.8%) considered PlantationHandicraft wood-making, small business, handicraft and services are Source: Filed trips the major ones. About 95% of total interviewees revealed that their households have to involve in additional jobs. Out of those, 67% involve in two additional jobs. For the rural households, additional jobs play a very important role in generating income for their daily consumption and expenses. Field trips and the survey results showed that the poor are normally those who do not involve in any 42 Impact assessment, Ky anh credit and saving program additional jobs so, food and food-stuff plantation is their only income generating activity. The households involve in small business and fishery and fish raising also account for small proportion, which are 6.9% and 4.3% respectively. Additional jobs are varied among the communes. For instance, in Ky Ninh, the common additional job is fishing and fish-source making. Anyway, figures showed that the poor in the project?s areas have these tried to diversify their production activities and they have been actively supported by the project?s funds. 17.3% of total loans have been used for non-farm activities such as fish-source making, investment in transportation means, small business, small preparation factories, which proves that the project has enabled the borrowers diversify their production activities in rural areas. The area which is withdrawing attention of the government. 82.3% of total loans have been used for agricultural activities, mainly animal raising such as pig, chicken, duck, etc. Only 0.3% of the interviewees revealed that their loans or part of their loans have been used for consumption purposes such as medical, school tuition fees for their children. 4. Substantial reduction of money lenders In the recent years, the formal credit system in Vietnam has experienced many renovations, expanded its outreach to farm households in general and the poor in particularly. Some rural financial institutions which were newly established such as the Bank for the Poor, Rural Shareholding Banks, People Credit Funds, etc. have actively narrowed the gap of rural financial services in rural areas. Anyway, lack of collateral and lack of confidence of the financial institutions on the borrowers are still a major constraint limiting the poor’s access to the formal financial sector. About 40% of total low income households have not accessed to formal financial services yet (Dao Van Hung, 2001). The World Bank in its recent report also revealed that about 50% of total the poor have to borrow from the informal financial sector (money-lenders) The survey results showed that 81% of total interviewees got no access to formal or semi-formal financial sector before receiving loans from the project. Complex lending procedures, collateral and lack of confidence of the financial institutions are main reasons. So, about 42% of the interviewees have to borrow from money-lenders (Figure 8) After 5 years of the project implementation, number of the poor who have to borrow from money-lenders was reduced significantly. The survey results revealed that only 8.5% of the interviewees access money-lenders for consumption loans such as medical, tuition fee for their Table 13: The members’ income before and after children (figure 10). participating in the project However, proportion of Monthly income Before (%) After (%) the interviewees who < VND 100,000 26.5 8.8 16.0 13.3 VND 100,000 – 200,000 37.4 28.6 VND 200,000 – 43 500,000 > VND 500,000 20.1 49.3 100.0 100.0 Total Source: Field trips Impact assessment, Ky anh credit and saving program still access their friends and relatives and the banks for loans increased from 4% to 7.5% and 29.3% to approximately 36% respectively since their loan demand is still not fully met. This situation is subject to some reasons: (i) the borrowers’ loan demand was increased due to their improved productions activities; (ii) normally, loans from friends and relatives are at reasonable interest rate compared to those charged by money-lenders; (iii) urgent consumption needs (funeral, wedding, medicine, etc.) Improved access to formal financial institutions indicated some positive implications: (i) firstly, after participating in the project, the members are able to access formal financial services (VBARD, PCFs, etc.); secondly, the formal financial institutions have showed efforts to improve their financial services in the project’s areas (figure 8) 5. Borrowers income increased, thus improved their living conditions. Almost 100% of total loans were invested in income-generating activities. After participating in the project, the members’ income 14has been significantly increased. In accordance to the survey results, 49.3% of the interviewees earn monthly income of VND 500,000/person, this figure was only 20.1% before the project (table 13). If the members’ income keeps increasing as fast as now, all of them will leave behind poverty (based on the current criteria). Income increase is varied among the communes as well as loan purposes. Normally, small business, services and handicraft are high profit-making activities so most of the borrowers involved in these activities agreed that Table 14: Utilization of increased income their income increased from Utilization of income %* 10% to 20% and even 20-30% in Procurement of some 36.4 some cases. assets Savings 32.0 The above figures proved that More meals 57.1 the poor women can take their Send children to school 48.6 own advantages to manage and Expansion of production 51.4 Others 0.3 utilize small loan Source: Field trips effectively for *The total will exceed 100% since many diversification and re-interviewees stick 2 to 3 answers. structure of their production activities aimed at higher income. Income increased thus improve the borrowers’ living conditions. The increased income was used to meet the households’ necessary needs such as more dishes in family’s meals (57.1%), intuition fees for children (48.6%), re-investment in production activities (51.4%). About 32% of total interviewees stated that thanks to increased income they were able to procure some assets such as bicycle, Chinese cassette, cheap chairs, etc. 14 Please note that most of the borrowers take at least two loans (each loan is 1 year) and many of them take 3 to 4 loans. This period is long enough to bring increased income to the members. 44 Impact assessment, Ky anh credit and saving program 6. Job creation Most of the interviewees (97%) Figure 9: Working time increased stated that their working time After loans was increased after borrowing loans from the project. But T?g 3 gi T?g 4 gi 17%none of them agreed that the 8%Kh玭g thay increased working time resulted iin their over-work. In theory, 2% a small loan (VND 2 million in T?g 2 gi case of the project) could not T?g 1 gi 45%22%lead to over-work of the women. In reality, the members who Source: Survey have borrowed loans from the project are pleased with their additional works since additional works bring higher income to the family and their free time can be utilized more effectively. Only 2% of the interviewees shared that they were able to create more works (mainly part-time work) for outside labor (some households making fish source in Ky Ninh). Such low proportion is mainly due to small loans that could not bring more jobs for outside labor in rural areas. 7. Women’s position in family and society was improved In addition to poverty alleviation and increase income, micro-finance has been realized as an effective tool to ensure women’s participation and empowerment. Following this approach, the project has created opportunities to improve women’s power, provide them with credit, enable them participate more in community as well as social and economic activities, especially during the current transaction period in Vietnam. Project evaluation in terms of the members’ empowerment is normally reviewed in relations to how the project improve the participants’ access to necessary resources (credit, training, land, technology and basic services such as health care, education) and to the project’s benefits (social position, income and more meals) Aries Alip. The project has not only Table 15: The members’ evaluation on their provided the poor women with own benefits after participating in the credit but also improve project their credit management %* Income utilization capacity. They have been More confidence in the family 70,7 trained in credit management. More respected by other members/ 57,1 23.2% of women interviewees husband stated that they have been More participation in social/ 87,6 trained the way to carry out group activities their production and More training 61,6 Source: Field trips business activities. The *The total will exceed 100% since many members’ autonomy in the family was strengthened (22.6%) and they interviewees stick 2 to 3 answers. 45 Impact assessment, Ky anh credit and saving program participated more in social as well as community development activities (28%) via meetings, training, etc. Higher autonomy and more participation in social activities resulted in improved position of the women in society. The project also allows the women to manage group funds and utilization of these funds is decided by the members themselves, by which, their power and confidence was strengthened. Case study 1: Thanks to the project’s loans, not only living conditions but social position of the members were improved Talking with us on her field, Ms. Pham Thi Hoa at Tam Hai, Ky Ninh Commune was pleased to reveal what impacts the savings and credit project funded by OXFAM has brought to her family. 4 years ago, her family was so poor. Her husband always got sick so she herself had to take care of her family. Lack of capital, no working facilities, she involved in many kinds of work such as rent labor, waste collection, etc.... Her life was up and down. She got up very earlier and come back home at late in order to earn just enough for the family’s food. Understanding Ms. Hoa’s family, the village women union persuaded her participate in savings and credit group since 1999. Her first loan was VND 1 million. This amount was invested by Ms. Hoa in raising of piglets (about 30 kg) and then raising of fatten pigs for selling – a work that her husband could be involved more. After the first loan, she sold 4 pigs, by which, she was able to pay her loan and there was some earning remained. After the first loan, she borrowed another loan of VND 500,000 for pig raising also. Currently, Ms. Hoa takes the third loan aimed at investing in a small shop which expects to be managed by her husband. Ms. Hoa revealed that thanks to the project’s loans the living conditions of her family were quite improved. In last three years, by great efforts spent by her family and loans provided by the project, her family’s income was substantially increased. She just built a new house that is small but much more strong than the old one. She also brought some assets such as TV, etc.... Her spiritual life is much more enjoyable.. She now has more time for participating in her group’s activities such as singing, volleyball and other activities on the occasion of the Position and role of the women were improved by their involvement international day for women (March 8). in making decision on borrowing and use of loans. The survey results indicated that decision of loan use was made by the discussion between husband and wife (90.4% of interviewees) and 92% of women said that they discussed with their husband on how to utilize their income. 9. Creating savings habit among the poor As analyzed above, all the borrowing members have been involved in obligatory and regular savings activities. This is critically important for creating savings habit among the members. In general, due to attractiveness of savings mobilization such as procedures, interest rate, etc. many members, particularly the better-off ones wish to deposit their savings into the groups. However, savings management capacity of the groups in particularly and of the women unions in general is limited so savings 46 Impact assessment, Ky anh credit and saving program mobilization is just carried out in some certain area. So, it is extremely important for the project to guide the members deposit their savings into the credit institutions such as VBARD, PCFs. Increased income leads to higher savings capacity. This is proved by answers of the customers and observation of the consultant team during its field trips. As response of the interviewees, savings can be in cash or in kind (in case, savings are in kinds they are normally income-generating assets such as buffalo, cows, etc.) B. Impacts to ky anh women union 1. Capacity of the women union’s staff was enhanced Women union is a social organization. Before implementing the project, the women union focused mainly on social activities so their skills in management and implementation of projects in general and savings and credit projects in particularly was really poor. Thanks to their participation in the project cycle from fact-findings to implementation and management, their skills in project management and implementation has been significantly enhanced and they were actually active in adjusting the project accordingly to local conditions. The women union?s staff have been participated in some training courses on rural credit organized by OXFAM, so the members of the project implementation unit are keen on basic activities of the credit and savings project. Along with expanding the project?s scope, the Ky Anh women union is facing with many new and complex issues such as savings mobilization, fund management, sustainability of the project. These are not small constraints provided that support given by Oxfam will be reduced and fully cut-off at the end of the project, which requires even greater efforts from the union to ensure follow-up activities. In addition to training on credit and savings, staff of district women union were trained with skills on planning, communication. Particularly, the women union?s staff were given a chance to practice what they have been trained. So, skills of the women union?s staff as well as coordinators on group management, communication have been clearly enhanced. Many staff who used to be shy now become so confident in front of the public talking about complex issues such as family planning, new cultural living habits. Before implementing the project, staff of commune and district women unions experienced many difficulties in providing knowledge and communicate with the union?s members. Performance of the credit and savings groups proved that they are now so skillful and effective in providing new knowledge, skills on health-care for women and children, family planning, agricultural production (especially animal raising), credit and savings. The project also gives a chance to establish a closed cooperation between the women 47 Impact assessment, Ky anh credit and saving program union and other local organizations, which in return supports other activities of the union. 2. The women union?s members were mobilized at higher level Below table showed some changes in terms of number of the members in some project communes. Due to attractiveness of the credit and savings project, in the communes where the project has been implemented, number of the members was significantly increased. Table 16. Number of the members before and after implementation of the project in some communes Number of New members Total Number of Number women since Commune HHs in eligible of participatiimplementation commune women members ng in the of the project groups 120 Ky Phu 1800 1300 930 664 30 Ky Giang 1340 820 485 130 350 Ky Khang 2000 1400 1200 340 71 Ky Long 786 708 277 256 Source: Commune Women Unions Mobilization of a large number of women plays an important role in fulfilling the union?s duties, especially in social activities such as family planning, new cultural family, improving the members? knowledge for economic development, etc. Many members indicated that participating in credit and savings groups they have a chance to enjoy social activities. In many commune, social activities such as cultural performance, sports (football, voleyball) were organised. This is so important for spritual life of the women in the project areas. 3. Position of women in local authorities was improved As observed in the meetings with party and authority agencies at district and commune levels, activities of the women union is highly appriciated. In the meetings, district and commune women unions were always refered to as a good example of high responsibility, full execution of working principles and working time, etc. The union’s staff revealed that this is a result of participation in the credit and savings project As a consequence, the women union fells easier to mobilize management and working staff of the local organizations involve in the project’s activities such as traning course on gender. Case study 2: Capacity of the union’s staff was significantly improved by participating in the project’s activities Before 1997, Ms. Luong Thi Gai at village 9, Ky Van, Ky Anh was a leader of credit and savings group under the project. She actively participated in the group’s activities and always found out effective ways to support and encourage the group’s members utilize their loans properly. In 1997, she was invited by Ky Anh women union to be the project’s coordinator by contract. During the time working at the district union, 48 she and many other women have a chance to attend many training courses on management of credit and savings group, community development, communication skills, planning. Thanks to her strong and active participation, Ms. Gai becomes a capable staff. She used to be shy in Impact assessment, Ky anh credit and saving program 4. Project management when Oxfam’s support ended. To follow-up the project’s activities when donors’ financial and management support is ended is a great constraint to the partners in Vietnam. Is the Ky Anh women union will be capable to maintain and follow-up the project’s activities when Oxfam’s support ended? Oxfam’s approach is to involve its partner as much as possible in the project cycle from need assessment, design and management. During the project implementation, Oxfam’s financial and technical assistance has been provided accordingly to the union’s demand. By this approach, in reality, the women union has implemented and managed the project. Its capacity is reflected in the above-analysed positive impacts. In other word, when Oxfam’s support ends by next year, the Ky Anh women uion will still be able to maintain and follow-uo the project’s activities at the current scope and extent. To ensure continuity of the project’s activities, some follwing issues should be addressed: Even though there are two full-time staff working for the project but they are still uncertain. Moreover, because of the union’s operating mechanism, the project’s management staff at commune level are always changed. Provided that the women union is a direct management partner of the project, who will supervise these activities. As a result of discussion with the district project management unit, this issue is not finalised and no certain about fees to maintain supervision activities. Beyond all, to effectvely supervise activities of the credit and savings project, the project management staff need to be equiped with a certain knowldge, experience and skills. So, in going time it is necessary to build up capacity for the project managemen unit in terms of management and supervision of credit and savings activities. C. impacts to community. Thanks to the project’s outreach (to 73% of total poor households), the poor’s life and their community has been changed. Non-borrowers’ participation in the project is a witness of the project’s atractiveness. Through the group’s activities, frendship and cooperation among the members were improved. “ Nowaday, if there is a wedding party some where all the people will come to support and share the happiness without invitation“ Le Van Trong, secertary of Ky Hung communist party. Activities of the other siminar projects that are currently implemented in Ky Anh have been affected by the project’s approach. We will invite the women union by their project experience to train staff working for our other credit and savings projects – Thieu Dinh Duy, secretary of Ky Anh communist party. 49 Impact assessment, Ky anh credit and saving program Given the project’s model is quite impressive, it is difficult to replicate in the subsidiary credit programs of the government since the project’s interest rate is quite high. The survey results indicated that outreach to the poor is more important than interest rate. Moreover, many lessons and issues learned from the project can be replicated in other siminar projects, which among others include lending and collection mechanism, training, etc. X. SWOT analysis of ky anh credit and savings project Based on the above analysis, strengths and weaknesses as well as opportunities and threats faced by the Ky Anh credit and savings project are summarised in following table. While it is worth to mention the project’s achievements in the recent years such as improvement of living conditions of the households participating in the project or diversification of social activities in the project’s area, there are many obstacles and constraints the Ky Anh women union and the project management unit will face in going time. These are both specific issues such as savings mobilization, group management or credit outreach and long-term and strategic issues such as financial and institutional sustainability of the project or how to maximine the project’s outreach. Table 17: SWOT analysis of ky anh credit and savings project Strengths Weaknesses , Capacity and committement of , Financial and institutional Ky Anh women union to sustainability of the project is implement the project; not clear. , Due to Oxfam’s approach, , The project’s scope is rather autonomy of Ky Anh women union small to ensure its was determined. Almost sustainability. decisions have been made by , Many short-comings in the the union, which indicates project’s operation mechanism, for high participation of local instance savings mobilization, partners. accounting, incentive for project , Active participation of the staff, etc. union members. , Experience and skills of Ky Anh , After 5 years of women union in credit and savings implementation, the project?s are limited. implementation mechanism has , No long-term plan, especially been set and stabilised. when Oxfam’s support is ended. , Many best practices in , Women uion in general and Ky Anh microfinance were applied and women union in particular are not proved success, which is professional in credit activities reflected in high repayment which are just their suplementary 50 Impact assessment, Ky anh credit and saving program rate 99%. ones. , Clear and direct impacts to , Fee for group leaders and women poverty alleviation and union’s staff is low so do not improvement of living encourage their participation. conditions. , Limited lingkage beween credit , The union’s activities were and savings activities and strengthened and gender issues support activities such as were introduced, which providing nowledge and skills in resulted in impressive loan utilization. achievements. Opportunities Threats , Clearer policies of the , Availability of other subsidiary government and relevant sources of fund. agencies on the project’s , Financial and institutional activities as well as micro-sustainability when Oxfam’s finance projects. support is ended. , Big potential to develop , Policy changes may affect credit credit and savings activities and savings activities of the in Ky Anh District. women union. , Ability to link with some , The project’s scope keeps other credit projects funded expanding (number of communes, by IFAD and other formal extent of fund, etc.) and credit institutions. operations are more complex. This is a real big constraint to Ky Anh women union. , Difficulty to design an appropriate credit and savings model. , Improve professional capacity of the women union (in terms of credit and savings management). 51 Impact assessment, Ky anh credit and saving program Part c Conclusion and recommendations I. conclusion With the great efforts of both two sides including Oxfam UK - the donor and Ky Anh women union - the project executive agency, the project has made some impressive progresses which enable the poor women access credit thus increase their income and capital for production, lessen money-lenders, improve their living conditions and empower their position in society. As a result, the project brought significant contribution to poverty alleviation in local areas. Beyond the direct impact of improvement of economic conditions, the project?s model is realized as a tool to empower the poor women, create opportunities for them to exchange and share experience and more importantly they can manage and support each others. As the end result, they could be able to create their own value, improve their confidence and position in their families as well as in society. In other word, the poor women have a chance to be treated equally. This model is an effective tool to overcome financial difficulties faced by the poor women at commune and village level. Success of the project at this stage proved appropriateness of credit and savings project managed by women and aimed at credit delivery to the poor women in Ky Anh. This is more meaningful under the context of in-perfect microfinance environment in Vietnam ly. current By this model, participation and resources from the public have been mobilized in order to improve living conditions of the poor women in general and the poor women in Ky Anh in particular. It is worth to say that management capacity and activities of the women union were improved. Through credit and savings activities many capable women, especially the poor women who meet all criteria of a manager or leader at commune level have been realized. Their capacity is challenging and they will bring significant contribution to improvement of their own living conditions as well as of the community. So far, the project?s financial sustainability was achieved but at low level. As forecasted, the project will reach higher level of financial sustainability. If the support, especially fund resources is maintained, the project can be developed at larger extent. The project?s institutional sustainability is still in question, which is similar to all other credit and savings projects in Vietnam. However, under the current microfinance environment the project?s model could be widely replicated if the following recommendations are addressed. 52 Impact assessment, Ky anh credit and saving program Thanks to coordination activities, capacity of the relevant organizations, especially the women unions at all levels was improved thus increase effectiveness of development programs they are carrying out currently. Participating in credit and savings groups as well as other supporting activities, the poor women?s knowledge about income- generating activities was improved. As a result, their position in the families and in society was determined. II. Recommendations While it is worth to mention the project?s achievements, there are a number of issues that need to be addressed by both the donor and executive agency in order to ensure the project?s sustainability when Oxfam UK?s support is ended. Even though all the issues were raised earlier, following is a summary of the major issues requesting substantial attention from the project. 1. For Ky Anh Women Union Selection of target benificiaries , The survey indicated that there is a number of the poor women having no access to finacial services provided that the formal financial institutions and the project have tried great efforts to expand their outreach, so the project should expand its access more to the poor, especially the poorest. s activities Group? , Group management staff should be revolved so all group members have a chance to participate and contribute to development of the group. One additional staff (vice-head) should be added to the groups. If group management staff is revolved, there is no need to pay fee for group management staff. , The commune project management unit should be supported by the district project management unit in designing a plan of supporting activities. Savings mobilization and management , Regulations on savings withdrawal should be unified and followed by all the project communes. Regular savings should not be withdrawn during the participation time in the project. , Regulations on voluntary savings should be adjusted so interest rate will be equal to those paid by the bank for agriculture and rural development; the project should be allowed to use up to 80% of such savings for loans , To withdraw and deposit savings into banks, it need to be signed by at least two persons and reconciliation should be made between the district project management unit and the bank or the bank should be requested to send account statement at the end of every month. 53 Impact assessment, Ky anh credit and saving program Funds , Interest (17%) transferred to the district project management unit should be divided into 3 items: administration, training and supervision. Reporting system , It is necessary to adjust accounting and information management systems. The reporting formats followed by commune and group levels should be simplified. Accounting report formats should be standardized (balance sheet, profit and loss statement, etc. Training , As soon as the project?s activities become sustainable, the district project management unit will mainly play a role of supervision and evaluation, so supervision and evaluation capacity of the district management staff should be strengthened (procedures, content, etc.). , An overall training plan for project management units at all levels and the borrowers should be prepared. Training manual should be designed also. Development plan: , The project should plan to introduce the members who are eligible and request big loans to the bank for agriculture and rural development. , Action plan up to the end of the project and development plan for 2 follow-up years should be prepared in order to ensure real sustainability. , Plan on project management staff should be ensured, especially management staff at commune level 2. For Oxfam UK In order to ensure smooth transfer of the project to Ky Anh women union and maintain the progresses that have been achiewed, some following solutions should be considered by Oxfam UK: 1) Additional funds should be added to some communes. In many project communes, because of small scope (number of members, fund resources, etc.) the project financial sustainability was not achieved. So Oxfam UK should provide additional funds to some communes in order to expand the project?s scope and reach financial sustainability. (refer to some sustainability scenarios of credit and savings project at Appendix 2) 2) Project management staff should be stabilized. This plays an important role to ensure continuity of the project management. 3) Assistance to women union should be strengthened. Particularly, Oxfam UK should assist the women union prepare action plan up 54 Impact assessment, Ky anh credit and saving program to the end of the project as well as for 2 follow-up years. Ky Anh women union?s capacity on management of credit and savings project should be strengthened in order to ensure their full independence in project management in 2 years to come. 4) Training on production knowledge and skills should be combined. Oxfam UK should support a training program on production skills for the members. Model of some simple production and business activities should be prepared. 55