Directive No. 02/2000/CT-NHNN15 on implementing tasks to consolidate, improve, and strengthen management of the people's credit fund system following the pilot phase

DIRECTIVE OF THE GOVERNOR OF THE STATE BANK

Regarding the implementation of tasks to strengthen,

improve and enhance management of the people's credit fund system after the pilot phase

After six years of implementing Decision No. 390/TTg dated July 27, 1993 of the Prime Minister on implementing the pilot project for establishing people's credit funds, it can be affirmed that the policy of the Party and State regarding the development of this model is correct and appropriate to the requirements of economic development in the agricultural and rural areas and the aspirations of the broad masses of the people. Through the mobilization of capital and lending support among members based on mutual assistance, the people's credit fund system has contributed to developing production and business, eradicating poverty and improving the living standards of the people, and limiting the phenomenon of usurious lending in rural areas. However, alongside the positive achievements, the six-year pilot period also revealed actual shortcomings and weaknesses such as: some people's credit funds have not closely adhered to their objectives and nature of community support activities, showing profit-seeking behavior; failing to strictly comply with regulations on credit systems, interest rates, finance, accounting records; the level of cadres is still inadequate compared to practical needs; the connection between people's credit funds is loose, etc.

In order to continue strengthening, improving and enhancing management of the people's credit fund system in the future, especially after the end of the pilot phase, the Governor of the State Bank requests relevant units in the banking sector to thoroughly understand and effectively implement the following measures:

1. Clearly define the main tasks in the future as focusing on consolidating, correcting, and improving the quality of operations of people's credit funds, temporarily not increasing the number of funds; consider revoking licenses for weak and incapable funds that, if allowed to continue, will negatively impact the entire system; perfecting organizational models and regulatory frameworks to create a solid foundation for people's credit funds to operate correctly and safely.

2. For now, while new mechanisms and policies for people's credit funds have yet to be issued, the people's credit fund system shall be implemented according to current laws and regulations. During the implementation of tasks after the pilot phase, the Branch Governors of the State Bank in provinces and cities shall direct local people's credit funds and regional funds to operate safely and efficiently.

3. Urgently complete the following tasks based on the summary of the pilot project for people's credit funds:

a) Complete the report summarizing the pilot project for establishing people's credit funds and submit it to the Standing Committee of the Political Bureau and the Prime Minister. Submit a decision by the Prime Minister to terminate the pilot project for establishing people's credit funds.

b) Perfect and submit to the Prime Minister for approval a proposal to consolidate and improve the people's credit fund system after the pilot project and subsequent years.

c) Submit a directive by the Political Bureau to strengthen the leadership of all levels of party committees, governments, organizations, and social organizations over people's credit funds after the end of the pilot project, clearly defining the responsibilities of the State Bank and People's Committees at all levels in managing the activities of people's credit funds to ensure they operate correctly and safely.

4) Establish a steering committee within the industry for consolidating and improving the people's credit fund system, headed by a Deputy Governor to direct the implementation of the consolidation proposal for people's credit funds after approval by the Prime Minister, focusing on the following key contents:

a) Perfect the model of people's credit funds towards building a system including directly operating organizations serving members and organizations for developing the system; each people's credit fund is an independent economic entity, operating independently and bearing responsibility for financial results, but being tightly connected for management and execution of capital flow, payment, and other services throughout the system smoothly and promptly; simultaneously ensuring internal supervision to ensure effective, safe, and lawful operations of people's credit funds.

b) Develop a roadmap to transform the three-tier people's credit fund model into a two-tier model; take appropriate steps to develop the Central People's Credit Fund to operate like a commercial bank to provide resources for the entire system, while playing a role in guiding, training, and supervising local people's credit funds.

c) Urgently perfect the draft Decree on the organization and operation of people's credit funds to be submitted to the Government for issuance, affirming that grassroots people's credit funds are established on the principle of voluntariness, democracy, equality, and self-responsibility for financial results aimed at mutual support and cooperation among members within a commune, ward, or town.

d) Promptly issue model bylaws for the operation of the Central People's Credit Fund and grassroots people's credit funds.

đ) Issue inspection and supervision regulations for the activities of people's credit funds. Clearly define the functions and responsibilities between management departments and inspection and supervision departments of people's credit funds at the State Bank; on this basis, further perfect the organizational structure, strengthen training to improve the cadre's capacity for management and inspection of people's credit funds to meet the requirements of management in the new phase.

e) Study and propose necessary support measures from related ministries, sectors, and the Government during the implementation of the consolidation and improvement plan for people's credit funds to ensure the achievement of set goals; at the same time, establish long-term and stable preferential policies (on tax, insurance, risk handling, financial mechanisms, etc.) to support the healthy development of people's credit funds in the right direction.

5) The Director of the State Bank branch in provinces and centrally-administered cities shall be responsible for directing and strengthening comprehensively the organization and operation of grassroots credit cooperatives within their jurisdiction in accordance with the following directions:

a) For grassroots credit cooperatives that have been converted to operate under the Law on Cooperatives and are currently operating effectively: it is necessary to leverage strengths, examine weaknesses to take measures to overcome them, ensuring that credit cooperatives operate in accordance with their objectives and legal regulations; consider allowing some grassroots credit cooperatives meeting conditions to act as agents for lending by the Agricultural Development Bank and the Poverty Service Bank to gain experience for widespread application within the credit cooperative system.

b) For grassroots credit cooperatives that do not meet conversion conditions or have been converted under the Law on Cooperatives but are weakly performing, at risk of losing payment capability, and unable to improve, it is necessary to firmly revoke their establishment and operation licenses. Resolution plans must propose specific solutions, methods of implementation for each cooperative, taking into account local characteristics, to be submitted for approval by the People's Committee of the province or city, while reporting to the Governor of the State Bank for coordination in directing resolution, minimizing economic and social instability caused by fluctuations.

c) Develop resolution plans for inter-village and inter-district credit cooperatives to only operate within one village or district; merge urban credit cooperatives with existing joint-stock commercial banks in the area, where there are no joint-stock commercial banks, gradually narrow operations until revoking establishment and operation licenses. Handling these cooperatives requires utmost caution to avoid disruption and instability in the locality, with completion no later than the end of 2001.

6) The Central Credit Cooperative must focus on improving its organizational structure to have sufficient capacity to fulfill its role as the center linking the credit cooperative system. Establish branch plans in key areas to directly serve grassroots credit cooperatives, replacing the role of regional credit cooperatives. Study and implement effectively certain tasks of the organization linking the development of the credit cooperative system.

7) Strengthen training for staff in credit cooperatives to meet standards or positions such as Chairman of the Board of Directors, General Director, Chief Accountant, Head of Supervisory Board, and credit cooperative staff. Review and ensure compliance with standards regarding moral character, professional qualifications, management and operational capabilities as stipulated by the State Bank. Assign the Department of Credit Cooperative Organizations to coordinate with relevant units of the State Bank to develop specific training programs for staff, including various training methods to meet the needs of credit cooperatives.

8) Intensify propaganda efforts to enhance public understanding of the nature, objectives, scope of activities, responsibilities, and autonomy in business operations of credit cooperatives.

9) The steering committee of the industry for consolidating and perfecting the credit cooperative system, related units of the State Bank within their functional and operational scope, shall be responsible for implementing and coordinating the implementation of the contents of this Directive to consolidate, perfect, and strengthen management over the credit cooperative system post-pilot phase.

In the course of implementation, if difficulties or obstacles arise, the unit shall report to the Governor of the State Bank for resolution./.