Center for Economic Development Studies

Today I met Mr Nha at the Center for Economic Development studies at the Vietnam National University.

The interesting thing about this center is that they work in development economics by providing microfinance to the agricultural sector. The loans are made in order to upgrade machinary and to move the technology of the agricultural sector forward to be congruent with modern methods.

The loans are quite large amounts, up to US$10,000. Loans of this size are needed as sometimes the machinary required is bought from overseas and is very expensive. Recipients of the loans are required to make repayments in kind.

Therefore a farmer who receives this type of loan and is able to buy new equipment and improved fertiliser might donate part of his yield for distribution to the community. This frees up capital normally spent on consumption to be used for other investment purposes.

Meeting with ACB

We've been invited to attend an information evening at the Asian Commercial Bank, which is the bank which is underwriting the proposed student loan scheme.

Students and staff of the university are going along to hear a talk from a member of staff. The ACB is a private bank, selected by the US Government for their compliance with international standards of due diligence.

The focus of USAID is only to support private sector development, so although Vietnam has several large government run banks, they are not in the picture.

USAID meeting

The USAID meeting went quite well. The representative from Washington was a Chinese-American who talked non stop extolling the virtues of the risk sharing model. The original model was quite restrictive but many of the guidelines have been relaxed. The result is a very flexible instrument- students in the West would be all over it.

The risk sharing element of the model requires the establishment of a trust which guarantees the students loans, funded by a contribution from student fees. The school receives 95% of the fees and allows 5% to be held in trust. In the event of default, the trust fund makes good on the loss.
When the trust fund is exhausted, the US government contribute to 50% of the loss, up to a maximum of US$500,000. The bank are left to cover any remaining losses.

If the participating school has an innovative spirit and wants to grow their programme, it would be a very workable model.

The kettle bites the dust

Vietnamese hotel rooms don't have fire alarms. I noticed this after the kettle spontaneously combusted. I also discovered after examining the scene that the on/off switch on the power socket is actually just for cosmetic purposes. The important thing is to DISCONNECT the device.

A dismal end to the best idea I'd EVER had.

Plan B

Tomorrow I am going to meet the director from the Center for Economic Development Studies, at the Vietnam National University. They have a faculty of economics over there which specialises in granting aid to microfinance projects. I hope this will be informative as I am concerned that the USAID model will crash and burn and I want to have another avenue to pursue while I am still here in Hanoi.

It seems that microfinance in Vietnam really pertains only to the very poor, and usually in rural areas. The type of scheme that we are looking at here at the MDE is for students that would be considered middle class, even though compared to the West their standard of living is low. According to our surveys our students mean USD income per month is US$120, compared to someone on the poverty line who earns less than a tenth of that amount.

As I have been in touch with three of the biggest local banks and none of them offer a suitable loan product, I am left to assume that this sector is not serviced very well, if at all.