MFI Report

I. Background: Thanh Hoa is one of the poorest provinces in Vietnam. With a total population of 3,700,000, the poor households account for 37% of the total households in the province. Lack of capital is the most common challenge for the poor households to improve their economic status. The establisment of the program is a response to this critical need of the community. The program’s target clients include: (i) Low income women who have ability to work but lack loan capital; (ii) Low income women with single family; (iii) Low income women with children who have dropped out of primary school; and (iv) Poor and poorest women who can not access any formal finance services. Given the issuance of the government’s Decree 28 on the establishment and operation of MFIs, the program committed to develop a strong and financially sustainable MFI via transitioning the program into a licensed microfinance institution which could providing on-going microfinance services to a large number of the poor. To achieve this goal, the program focused on improving key areas of the program capacities, and so far, the program has achieved key positive results as follows: (i) Streamlined, efficient, and independent organizational structure; (ii) Trained experienced and full-time staff; (iii) Revised 12 month loan, 6 month loan products, and mandatory savings that meeting the needs of clients; (iv) The establishment of guarantee fund for accessing commercial loans (aiming at expanding the program's client base). In terms of operational performance, the program reached 5,572 active clients with the excellent repayment rate of over 99% as of December 2006. While 99.6% of the program clients are poor and low-income women (true to the program's mission), the program fully covered its oprerational cost with Opperational Self-Sufficiency rate of 124% in 2006. In terms of social and economic impact, the program contributes to the positive changes in the lives of thousands of disadvantaged children and poor women in Thanh Hoa province each year. According to Mekong Economics Ltd. (an international consulting firm that conducted an evaluation on the impact of Thanh Hoa MF program), the program created positive impacts on its beneficiaries and local community. In detail: (i) The beneficiaries benefited from the program as follows: Diversified sources of income; Increased income; Improved living condition; Improved social position of women; Improved understanding of local women on financial services; and (ii) the local community benefited from the program as follows: Improved outreach of target clients for accessing credit services; and Decreased number of children who dropped out of primary school or suffered malnutrition.

II. Main Challenges: the program is facing the challenges of transitioning into a licensed and poverty focused MFI, which is professional, efficient, and sustainable. To prepare the program for a successful transformation, the program needs to complete the folowing activites: (i) Provide strategic management training for the program's leadership and management; (ii) Improve the MIS (Management Information System) of the program; (iii) Formulate the program business plan for the next 5 years; (iv) Borrowing commercial loans for market expansion via setting up a guarantee fund. To accomplish all of those important activities, which are beyond its capacity, the program really needs valuable support from outside. Cacher