Microcredits in Vietnam : an Evolving Landscape

Discover through the testimony of Bernard Kervyn, head of the NGO Mekong Plus engaged for three decades in Vietnam and Cambodia, the rich and nuanced history of the microcredit program. Let’s dive into the experiences, challenges, and successes that have shaped this initiative, providing a unique insight into the social and economic evolution at the heart of Vietnamese communities.



When I arrived in Vietnam 30 years ago, two things struck me: a visibly dynamic, active population; and the cost of capital. In villages, it was common to pay up to 20% interest per month!

But that wasn’t the worst: sometimes, villagers were forced to mortgage their last rice field, and until the loan was repaid, they couldn’t access their field… and sometimes, they lost it altogether…


Usurers and banks: Too demanding conditions for the Vietnamese

Usurers are often blamed. While they charge high interest, they also sometimes lose their capital when their borrowers go bankrupt and disappear. Because worse than a high interest rate is the total absence of capital: To urgently care for a family member. To pay for education. For fertilizers, without which the harvest will be poor, etc.

A quick estimate also shows that for economic investments, like buying inputs for agriculture, a return of 10% per month is common.

A good indicator to determine if microcredit can be a useful tool for villagers is the cost of capital. At that time, bank interest rates were around 8% per year.

But to access them, you had to provide guarantees, especially a property title.

To my surprise, in the communes where we worked 30 years ago, many didn’t have them, including public figures such as the president of the commune of Túc Trung, for example (Đình Quan, Đồng Nai)! .


Mekong Plus Microcredit Solution: Initial Trials

So, we quickly launched a microcredit program with solidarity groups, following the proven formula of Grameen Bank in Bangladesh.

Groups of women only were formed.

Why women?

Because women focus more on the well-being of the family, the health and education of children, while their men are often inclined towards drinking: In Vietnam, it is estimated that half of the men drink too much alcohol, which is cheap.

Rice alcohol, at 40 degrees, sells for a few cents only. So, many men drink part of the money earned during the day, and once they’ve drunk, beware of the consequences: violence, they break everything at home… See, for example:


So, the groups would meet every week, each woman bringing the jointly decided small savings: often at that time, the equivalent of $0.20 USD.

Women enjoyed gathering, chatting, and managed their capital well. They decided together whom to lend to and at what rate. For group members, the rate was moderate, but they could also lend to neighbors, non-group members, with a higher rate.


A Program a Victim of Its Success?

We then had up to 1000 active groups, one or more per village. Loans were repaid in small weekly amounts: $40 loan, repaid $2 at a time.

Unfortunately, the downside of these numerous groups was that operating costs far exceeded the low interest rates of 2% per month.

1000 groups mean 1000 visits per week, and our teams, mostly women, didn’t like going on isolated paths, especially at dusk…

Problems quickly arose.

Moreover, the authorities in some communes viewed this kind of “competition” unfavorably. Because the groups sometimes discussed contentious issues: “why is the hand pump in front of the school still not repaired?” And also, the groups accumulated significant savings, several hundred dollars.

In one district, the vice-president of the People’s Committee decreed that this savings should be managed and handed over to the authorities! It caused an outcry: the women rebelled, and 800 signatures were collected and sent to the province. In vain, as the authorities did not yield, and the program was closed in that district (Đinh Quan, Đồng Nai).

It must be said that the authorities rightly feared malpractices in the villages.

In case of problems, who could untangle the responsibilities of each?

In Vietnam, one always wants to preserve order, at any cost!

My apologies for the oversight. Here’s the text with HTML included:


Program Victim of Its Success?

We had up to 1000 active groups, one or more per village. Loans were repaid in small weekly amounts: a $40 loan repaid $2 at a time.

Unfortunately, the downside of these numerous groups was that operating costs far exceeded the low 2% monthly interest rates.

Having 1000 groups meant 1000 visits per week, and our teams, mostly women, were reluctant to go on isolated paths, especially at dusk…

Problems quickly arose.

Moreover, authorities in some communes viewed this kind of “competition” with disapproval. The groups sometimes discussed contentious issues like, “Why hasn’t the hand pump in front of the school been repaired yet?” Additionally, the groups accumulated a significant amount of savings, several hundred dollars.

In one district, the vice president of the People’s Committee decreed that this savings should be managed and handed over to the authorities!

It caused an outcry: women rebelled, and 800 signatures were collected and sent to the province. In vain, as the authorities did not yield, and the program was closed in that district (Đinh Quan, Đồng Nai).

It must be said that the authorities had, rightly, feared malfeasance in the villages.

In case of problems, who could unravel the responsibilities of each?

In Vietnam, the desire is always to preserve order, at any cost!


A Turbulent Learning Experience

Abuse of Trust

And unfortunately, we had malfeasance.

In the team of Tánh Linh (Bình Thuận), the young Hanh, 26 years old, responsible for dozens of credit groups, couldn’t resist the temptation of loan sharks. Pocketing the money to be distributed in the groups, she detoured to the loan shark, who promised her a super profit.

For repayments, it was the same: she deposited them with the loan shark, not with the project!

At the team’s monthly meeting, everyone had to produce their report, with the state of loans and repayments.

But Hanh, before the meeting, would change the computer clock before printing her report, so the repayments from her groups didn’t appear as overdue! But one day her deceit was discovered: exposed, she couldn’t get out of it, having embezzled $14,000!

Every day in the villages, she collected repayments and diverted new loans and repayments! Team meeting, investigation… and delivery to the police. The court punished her with 16 years of imprisonment!

After a period of seven years, the family finally came to us to repay the full amount. Together, we went to court to request her release.


The Difficulty of Organizing Meetings

I was very friendly and close to Doctor Duong Quynh Hoa, former Minister of Health, and head of the Pediatrics Center at Nhi Đông 2 Hospital in Saigon. A colorful character who could terrorize even the prime minister in Hà-Nội, since they had fought together in the war.

With Dr. Hoa, we had organized a seminar for about forty people from various NGOs, with the aim of sharing experiences. Alas! Authorities were furious; Dr. Hoa had not asked permission for this meeting!

Not by chance: “I, ask for permission? Never!” Unfortunately, we won’t have any more seminars organized at Dr. Hoa’s, as in Vietnam, every meeting is subject to prior authorization, with the list of participants, and must be held in government premises.


Owners Finally Recognized: The End of Microcredit Groups?

Then, in 2001, it was upheaval: the authorities had issued property titles to those who owned a plot of land, as a result of which they could finally go to the bank to finance their projects!

The impact on our microcredit program was immediate.

Good for the villagers, but in comparison, our savings-credit groups were no longer as appealing: many meetings to borrow very small amounts ($100, $200…), while banks now granted much larger loans at lower rates: 1% per month became a common borrowing rate, cheaper than microcredit.

Savings-credit groups were effective when the need for solidarity was felt, with everyone respecting discipline… But once our microcredits were no longer competitive enough, the temptation not to repay became apparent.

In a group, when a woman doesn’t repay, the rule is that others, in solidarity, repay on her behalf. An acceptable situation when it’s one person in a good group, but untenable for more precarious groups, or when cases multiply: the entire group becomes defaulting, refuses to repay, or always delays payments, hoping to wear out our teams. Because for our agents, they have to go far, through difficult paths, flooded during the monsoon, often in the evening – when peasants return from the fields.

One evening, I accompanied one of these program agents on a field trip.

We arrived at a dimly lit small farm, at the leader of a savings-credit group, to collect some repayments.

But here comes the husband, heavily intoxicated after a good session of rice wine with his neighbors. Furious, he threatened us and called the police, so I had to spend the evening at the station, trying

to explain our microcredit work to the local police…

Previously, communal authorities exhausted themselves helping us recover loans, but after a while, they began to dislike this program that caused them so much trouble. Gradually, the authorities thus requested the closure of these programs.


Change of Course for Our Microcredits: Helping the Most Vulnerable

It was out of the question to persist: the microcredit program had to be completely revamped. We notably abandoned the mandatory weekly savings concept and, to put it simply, no interest during the first cycles.

And since the majority of villagers had access to bank loans, we had to target only the very poor, deprived of any property title. In fact, these victims of loan sharks were often very poor women, abandoned by their husbands, suffering from violence and therefore psychologically fragile, without the support of a solidarity group.

Frequently, these women have no land to cultivate, or at most 10 acres… The roof of their “house,” made of bamboo and leaves, leaks everywhere. Children drop out of school, everyone has fragile health and spends a lot, and poorly, on healthcare.

Instead of reaching 30-40% of villagers, the microcredit program updated would then only concern 5-10% of the population, and would no longer take the form of groups, the distance between members being such that we could no longer expect sufficient solidarity among members.

The microcredit program thus became, to a large extent, a social program, providing psychological assistance, and practical training to optimize the very small available resources.


A Successful Renewal

This new program now perfectly matches the needs of these women who most of the time lack good technical knowledge to succeed in good farming and harvesting.

In fact, one can guess, the bad payers are those who “can afford it,” they have other recourse and are not afraid. The very poor, on the contrary, know that the project is their best chance, if not the only and last one.

Today, the loan recovery rate is 99.9%: proof that it perfectly meets the needs of the very poor.

Health advice is also highly appreciated because when you fall into great poverty, it’s almost always because a child fell ill one day, you spent a fortune to treat him, you had to sell the cow…

In addition to microloans to finance activities, Mekong Plus also grants amounts to the poorest families to cover school expenses. Indeed, school fees are exorbitant for our poorest families, representing 30% of their budget, if not more. And when children drop out of school, there is a risk of plunging into great poverty for another generation.


Reducing Poverty in Vietnam: A Still Long Journey

Vietnam – Cambodia much less – has a very proactive poverty reduction policy.

The Women’s Union, for example (a branch of the party for women and development), offers all kinds of benefits and advice to those on the list of the very poor: microcredit, healthcare, reduction of school fees, even housing assistance. But be careful: one can easily be removed from this list by the authorities.

The pressure “from above” to present a better image of the country means that communes find a thousand pretexts to declare that someone is no longer poor. So Ms. Hoa (Tánh Linh district) received an old black and white television: she is declared “less poor”! Ms. Vu (Long My district) rents a plot to grow more paddy: “less poor”! And there is no recourse.

Even when you are on the right list, the formalities are long, and the results are uncertain.

If you have a property title for 20-40 ares, the bank is willing to lend, but not less than $1000! There is bureaucracy, “fake fees”… So we dare not, such an amount, how to repay? We risk losing everything.

So the success of microcredit today comes from the fact that it proposes small loans: we start at $100 and gradually up to $400, and also because it is accompanied by technical support and frequent visits with advice, not with threats! The stated goal is not so much to recover repayments but to help these women get out of it sustainably, with their children and their entire family.


Going Further

If the goal of microcredit is to help increase incomes, it is not always possible beyond a certain threshold.

Thus, a single mother, with 5 ares for a small vegetable garden and a chicken farm, will be able to optimize her garden, reduce the mortality of her farm at best… but after? We reach the physical limits of her resources: She is paid $7-8/day. Microcredit cannot change anything about it.

As long as a way can be found to increase income, it must be done, and project agents provide all the necessary advice and training. But there comes a time when we don’t know how to increase the production and profits of the small farm any further.

The criterion for continuing to help this woman becomes: will she repay? We will give her flexibility to avoid disasters, as long as, ultimately, she manages to repay.

But Mekong Plus doesn’t stop there: beyond helping to develop economic activities, microcredit can take on other forms, especially when it comes to paying for children’s education. This is indeed a significant amount, often $200 or more. Thanks to microcredit, this expense can be spread over time. Otherwise, the only recourse is the moneylender, who lends at 10% per month!

We are confident and show empathy; the village women know this and repay as soon as they can. So, we continue with microcredits, also thinking a lot about the children. The future of the household depends on their health and education in the long run. The psychological and social impact of our visits is significant. “Our visits to these village women are very useful. In fact, these are often the only moments when they can share their concerns, find comfort, and brainstorm with us for solutions.



These stories, between challenges and successes, reveal the lasting impact of microcredit on the lives of the most vulnerable women and families.

If you want to contribute to this positive transformation, we invite you to explore further by visiting our dedicated page to our microcredit program or by financing a microcredit among the projects selected by Mekong Plus.

Join us in this initiative to promote economic and social progress in Vietnam and Cambodia. Every gesture counts; every support makes a difference.


Bernard Kervyn

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