Policy credit builds sustainable livelihoods from the grassroots

Policy credit builds sustainable livelihoods from the grassroots

Policy credit is reaching deeper into local communities, turning modest loans into productive livelihoods, jobs and income while creating a grassroots mechanism for sustainable economic development.

In 2022, resident Nguyen Van Quoc of Tan Hoa commune in the Mekong Delta province of Vinh Long, borrowed $1,600 from Tieu Can Transaction Office of Vietnam Bank for Social Policies (VBSP) to buy five goats and invest in housing facilities.

When the model proved effective, his family borrowed an additional $800 while contributing counterpart capital to expand the herd.

To date, total investment in the model has reached nearly $4,000. The herd now consists of eight breeding does, one buck and four meat goats. After about 15 months, the family sold more than 20 kids for around $2,400, generating a profit margin of approximately 60–70 per cent.

Image courtesy of VBSP

The Quoc family did not pursue intensive farming requiring high costs, but instead made use of the land around their home to grow grass and used banana plants, sesbania leaves, jackfruit leaves and other naturally available foliage as feed, supplemented with bran, corn and other nutritional feed.

The herd has been gradually expanded in line with the family’s capacity and the performance of each production cycle.

“Our family has limited land, so for now I am developing the herd gradually, using the breeding goats as the basis for expansion. Given the initial results, I plan to build another two or three pens to gradually increase the scale,” Quoc said.

In another household in Tan Hoa commune, local man Kim Ngan started with a $600 loan to purchase a breeding cow. From the first cow, the family raised and expanded the herd, which has now grown to 10 head, while the loan has been fully repaid.

The two stories show how a small loan can become the starting capital for production. Borrowers begin with a model suited to their land, labour and financial capacity, then accumulate and reinvest from the proceeds of production.

Across the system, job-creation lending is one of VBSP’s major credit programmes. As of June 30, outstanding loans under the programme stood at $6.5 billion, accounting for 35.8 per cent of total policy credit.

In the first six months of the year, policy capital supported production and business investment and helped create jobs for nearly 487,000 workers. Total outstanding policy credit reached $18.17 billion, with more than 6.7 million customers having loans.

Looking from these large figures back to a goat-raising or cattle-raising household, the destination of a loan does not lie at the point of disbursement. Capital only truly delivers its value when it flows into activities that generate products, revenue and income, enabling borrowers to repay their loans and sustain their livelihoods.

Capital goes hand in hand with borrowers

To ensure capital reaches the right places and delivers results, VBSP does not rely solely on lending activities at its banking offices.

In Tan Hoa commune, the communal Farmers’ Association manages 24 savings and credit groups, with 1,221 members borrowing from VBSP and total outstanding loans of more than $1.72 million.

Through these groups, policy credit is brought to local people, while the association coordinates the inspection and supervision of loan use.

Since the outset of the year, the association has coordinated four technical training courses for 200 members on crop cultivation, animal husbandry, coconut and vegetable care; maintained 30 cooperative groups with 426 members and established four economic models.

At Tieu Can Transaction Office of VBSP, as of August 31, total capital stood at nearly $24.9 million, while lending turnover in the first eight months exceeded $5.8 million, reaching nearly 3,000 borrower transactions; total outstanding loans stood at $24.8 million.

Outstanding policy credit entrusted through socio-political organisations amounted to $24.12 million, accounting for 97.3 per cent of total oans.

The Farmers’ Association manages 79 savings and credit groups, with 3,334 households having outstanding loans and total credit approximating $6.2 million.

VBSP also maintains nearly 10,000 transaction points and more than 165,000 savings and credit groups at the grassroots level. This network provides a way of bringing capital closer to local people: loans are brought down to the grassroots, while the use of capital is monitored right where borrowers live and produce.

A loan may start with $600 to buy a cow or $1,600 to establish a goat herd. When placed within the right livelihood model, that capital can generate cash flow for people to repay debt, reinvest and continue production. This is when policy credit truly becomes part of the process of creating livelihoods at the grassroots level.

VIR