Decree No. 165/2007/ND-CP Amending, Supplementing, and Repealing Certain Provisions of Decree No. 28/2005/ND-CP dated March 9, 2005, of the Government on the Organization and Operation of Small-Scale Financial Organizations in Vietnam

DECREE

Amending, supplementing, and abolishing certain articles of Decree No. 28/2005/NĐ-CPdated March 9, 2005 of the Government on the organization and operationof small-scale financial organizations in Vietnam

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THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Law on the State Bank of Vietnam dated December 12, 1997 and the Law Amending and Supplementing Certain Articles of the Law on the State Bank of Vietnam dated June 17, 2003;

Pursuant to the Law on Credit Organizations dated December 12, 1997 and the Law Amending and Supplementing Certain Articles of the Law on Credit Organizations dated June 15, 2004;

Pursuant to the Enterprise Law dated December 29, 2005;

Considering the proposal of the Governor of the State Bank of Vietnam,

DECREE :

Article 1. Amending, supplementing, and abolishing certain articles of Decree No. 28/2005/NĐ-CP dated March 9, 2005 of the Government on the organization and operation of small-scale financial organizations in Vietnam as follows:

1. Clause 3, 5, 6, and 7 of Article 2 shall be amended and supplemented as follows:

"3. Small and simple financial and banking services include: small-scale credit; mandatory savings deposits; voluntary savings deposits; some payment services for low-income households and individuals.

5. Small-scale financial customers are individuals and households with low income satisfying the criteria set forth by small-scale financial organizations based on reference to the poverty standard as decided by

6. Mandatory savings: is the amount of money that small-scale financial customers must deposit at small-scale financial organizations to obtain the right to borrow from the same organization. Mandatory savings is a small amount of money deposited periodically or a sum corresponding to a certain percentage of the loan value retained according to the regulations of small-scale financial organizations. Small-scale financial organizations may use mandatory savings to secure loans from small-scale financial customers.

7. Voluntary savings: is the deposit made by small-scale financial customers and other organizations and individuals in accordance with the Law on Credit Organizations."

2. Article 3 shall be amended as follows:

"Article 3. Statutory Capital

The statutory capital of small-scale financial organizations is five billion Vietnamese dong."

3. Clause 2 of Article 5 is amended as follows:

"2. In case small-scale financial organizations have the need to expand their operating area to another province or centrally governed city outside the province or city where their headquarters is located, such organizations must establish a branch in that province or city. The establishment of branches by small-scale financial organizations shall be carried out in accordance with the regulations of the State Bank."

4. Article 6 is amended and supplemented as follows:

"Article 6. Business Form, Capital Contribution, and Transfer of Contributed Capital:

1. Small-scale financial organizations are enterprises established in the form of limited liability companies in accordance with the Enterprise Law and the provisions of this Decree;

2. The number of contributing members, the proportion of contributed capital, and the transfer of contributed capital shall be carried out in accordance with the regulations of the State Bank."

5. Clause 7 of Article 8 shall be amended and supplemented as follows:

"7. a) For small-scale financial organizations established in the form of a limited liability company with two or more members, there must be at least one member contributing capital who is an organization belonging to the categories specified in Clause 2 of Article 1 of Decree No. 28/2005/NĐ-CP dated March 9, 2005 of the Government and meeting the following conditions:

- Directly participating in the management or operation of one or several programs, projects providing mandatory savings receipt and small-scale credit services in Vietnam for three consecutive years prior to the date of submitting the application for the License;

- Proving the management, control, and safe, sustainable operation of small-scale financial activities for at least one year immediately preceding the date of submitting the application for the License;

- The portion of the contributed capital of this member in the small-scale financial organization must meet the minimum ratio prescribed by the State Bank.

b) For small-scale financial organizations established in the form of a single-member limited liability company:

- The owner must be a legally established and operating political-social organization in Vietnam;

- Directly participating in the management or operation of one or several programs, projects providing mandatory savings receipt and small-scale credit services in Vietnam for three consecutive years prior to the date of submitting the application for the License;

- Proving the management, control, and safe, sustainable operation of small-scale financial activities for at least one year immediately preceding the date of submitting the application for the License."

6. Clause 7 of Article 9 shall be amended and supplemented as follows:

"7. Financial statements of programs, projects, or organizations engaged in small-scale financial activities for the two most recent fiscal years, audited by an independent auditing organization."

7. Point d of Clause 1 of Article 12 shall be amended and supplemented as follows:

"d) Publishing in central or local newspapers in accordance with the provisions of the law on the contents of the License."

8. Article 16 shall be amended and supplemented as follows:

"Article 16. Organizational Structure of Small-Scale Financial Organizations

1. Small-scale financial organizations shall have a General Meeting of Members (shareholders), Board of Directors, Supervisory Board, and General Director (Director) and supporting staff;

2. The Board of Directors must have at least three members; the Supervisory Board must have at least three members, of which at least half must be full-time members;

3. The term of office of the Board of Directors and the Supervisory Board is five years; the term of office of members of the Board of Directors and the Supervisory Board does not exceed five years. In cases where additional members are elected or members are replaced due to resignation or removal during the term of office, the term of office of those members is the remaining time of the term of the Board of Directors and the Supervisory Board. Members of the Board of Directors and the Supervisory Board may be re-elected.

4. Members of the Board of Directors, the Supervisory Board, and the General Director (Director) of small-scale financial organizations must meet the requirements regarding professional qualifications and other capability standards as prescribed by the State Bank.

5. The election, appointment, and removal of members of the Board of Directors, the Supervisory Board, and the General Director (Director) of small-scale financial organizations shall be carried out in accordance with the regulations of the State Bank."

9. Clause 1 of Article 22 shall be amended as follows:

"1. Accepting deposits:

a) Mandatory savings;

b) Voluntary savings."

10. Article 27 is amended and supplemented as follows:

"Article 27. Restrictions on credit activities and provisions to ensure safety in operations

1. Small financial organizations must comply with the following regulations:

a) The maximum value of a small credit loan;

b) The minimum ratio of total outstanding small credit loans to the total outstanding credit of small financial organizations;

c) Ratios and restrictions to ensure safety in the operation of small financial organizations;

d) Classification of debts, provision for and use of reserves to handle risks in the operation of small financial organizations.

2. The State Bank shall be responsible for providing specific guidance on the regulations stipulated in Clause 1 of this Article.

3. Small financial organizations must participate in deposit insurance according to the provisions of the law on deposit insurance for voluntary deposit balances."

11. Article 30 shall be amended and supplemented as follows:

"Article 30. Accounting

Small financial organizations shall implement accounting and voucher systems in accordance with the provisions of the law and the guidelines of the Ministry of Finance."

12. Clause 2 of Article 37 is amended and supplemented as follows:

"2. Within 12 (twelve) months from the date this Decree takes effect, organizations engaging in small financial activities must submit applications for licenses in accordance with this Decree if:

a) They are currently mobilizing voluntary deposits from organizations and individuals who are not small financial customers; and/or

b) The number of small financial customer accounts holding savings deposits or the balance of small financial customer savings deposits exceeds the limit set by the State Bank.

After this period, organizations, programs, and projects engaging in small financial activities that have no need to apply for a license or do not meet the conditions for obtaining a license must immediately cease mobilizing voluntary deposits from non-small financial customers and must return the deposited amounts to those customers when due, while also reducing the scale of savings deposits from small financial customers below the limit set by the State Bank. In exceptional cases, the State Bank will report.

13. Point d of Clause 2 of Article 13, Article 15, Article 20, and Article 36 are abolished.

Article 2. This Decree takes effect 15 days from the date of publication in the Official Gazette. Previous regulations contrary to this Decree are hereby abolished.

Article 3. The Governor of the State Bank of Vietnam shall be responsible for guiding the implementation of this Decree.

Article 4. The Ministers, Heads of ministerial-level agencies, Heads of government-attached agencies, Chairpersons of provincial People's Committees under the central city shall be responsible for implementing this Decree./.