Circular No. 37/2019/TT-BTC guiding financial regulations for microfinance programs and projects of political organizations, political-social organizations, and non-governmental organizations.

 

CIRCULAR

GUIDELINES ON THE FINANCIAL REGIME FOR MICROFINANCE PROGRAMS AND PROJECTS OF POLITICAL ORGANIZATIONS, POLITICAL-SOCIAL ORGANIZATIONS, AND NON-GOVERNMENTAL ORGANIZATIONS

Pursuant to Decree No. 87/2017/NĐ-CP dated July 26, 2017 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decision No. 20/2017/QĐ-TTg dated June 12, 2017 of the Prime Minister on the operation of microfinance programs and projects of political organizations, political-social organizations, and non-governmental organizations;

At the proposal of the Director of the Department of Banking and Financial Institutions;

The Minister of Finance issues this Circular guiding the financial regime for microfinance programs and projects of political organizations, political-social organizations, and non-governmental organizations.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular guides the financial regime for microfinance programs and projects of political organizations, political-social organizations, and non-governmental organizations (hereinafter referred to as microfinance programs and projects).

Article 2. Applicability

1. Microfinance programs and projects are established and operate in Vietnam according to Decision No. 20/2017/QĐ-TTG dated June 12, 2017 of the Prime Minister on the operation of microfinance programs and projects of political organizations, political-social organizations, and non-governmental organizations (hereinafter referred to as Decision No. 20/2017/QĐ-TTG) and other relevant legal documents.

2. Other relevant agencies, organizations, and individuals.

Chapter II

SPECIFIC PROVISIONS

Article 3. Capital of microfinance programs and projects

1. Capital of microfinance programs and projects

a) Capital for implementing microfinance programs and projects includes:

- Capital transferred and provided by political organizations, political-social organizations, and non-governmental organizations to microfinance programs and projects;

- Capital contributions from organizations and individuals (if any);

- Non-reimbursable grants and donations from organizations and individuals.

b) Revaluation surplus is the difference between the book value of assets and their revalued value when there is a decision by the State or other cases as prescribed by law.

c) Funds assigned for preparing and implementing microfinance programs and projects and other funds established as prescribed.

d) Accumulated retained earnings; accumulated losses not yet resolved (if any).

đ) Other capital legally owned by microfinance programs and projects as prescribed by law.

2. Capital raised through various forms

a) Accepting mandatory and voluntary savings deposits from microfinance customers according to the regulations of microfinance programs and projects. The total amount of voluntary savings deposits shall not exceed 30% of the allocated capital of microfinance programs and projects.

b) Accepting entrusted loans from the Government, organizations, and individuals as prescribed by law.

c) Borrowing from credit institutions, financial institutions, and other entities as prescribed by law.

d) Receiving non-reimbursable and reimbursable grants and donations from the Government, domestic and foreign organizations, and individuals.

3. Other capital as prescribed by law.

Article 4. Management and utilization of capital and assets of microfinance programs and projects

1. Microfinance programs and projects are responsible for managing and utilizing capital and assets of microfinance programs and projects in accordance with the law and specific guidelines set forth in this Circular.

2. Independent tracking and accounting for capital and other assets of political organizations, political-social organizations, and non-governmental organizations.

3. Microfinance programs and projects shall conduct accounting in accordance with the Ministry of Finance's regulations; fully, accurately, and promptly reflect the usage and changes in capital and assets during business operations; clearly define responsibilities and penalties for each department and individual in case of damage or loss of capital and assets of microfinance programs and projects.

4. For leased assets, microfinance programs and projects are responsible for managing, preserving, or using them in accordance with agreements that comply with the law.

5. The establishment and use of provisions for loan accounts: microfinance programs and projects shall implement according to regulations applicable to microfinance organizations.

Article 5. Revenue

Revenue of microfinance programs and projects includes:

1. Interest income and similar income, including:

a) Interest income from deposits at credit institutions.

b) Interest income from loans to microfinance customers.

c) Other income from credit activities as prescribed by law.

2. Service income includes:

a) Income from accepting entrusted loans.

b) Income from consulting, supporting, and training services for microfinance customers related to microfinance activities.

c) Income from agency sales of insurance products.

3. Exchange rate differential income as prescribed by accounting standards and current legal regulations.

4. Voluntary contributions and lawful sponsorships from domestic and foreign organizations and individuals shall be recorded as income in accordance with the law.

5. Other income as prescribed by law, including:

a) Recovered provisions.

b) Income from debts processed by risk provisions, debts written off, and debts lost or untraceable creditors now recovered.

c) Customer fines and compensation for breach of contract.

d) Insurance compensation after covering losses.

đ) Income from asset liquidation.

e) Other income.

Article 6. Principles of Revenue Recognition

1. Recording and accounting for revenue and taxable income shall be carried out in accordance with Vietnamese accounting standards, the Law on Corporate Income Tax, circulars guiding the Law on Corporate Income Tax, and other relevant legal documents.

2. For interest income and similar income

a) Interest income from microloan activities: microfinance programs and projects shall record accrued interest receivable within the period for on-time loans as income. For overdue loans, accrued interest receivable shall not be recorded as income but tracked off-balance sheet until collected, then recorded as income.

b) Interest income from deposits: is the interest receivable from deposits of microfinance programs and projects at credit institutions within the period.

3. Income from receiving non-reimbursable grants to implement development programs and activities of microfinance programs and projects outside collection and payment services: is the actual amount received upon receipt of the grant.

4. For income from exchange rate differences due to revaluation of foreign currency and gold: microfinance programs and projects shall record such income in accordance with accounting standards and relevant laws.

5. For other business revenues: revenue is the total amount of money from selling products, goods, and providing services during the period that has been accepted for payment by customers (if there is valid documentation), regardless of whether the money has been collected or not.

6. For receivables that have been recorded as income but are assessed as uncollectible or remain uncollected beyond the due date, the microfinance program shall reduce revenue if it is within the same accounting period or record it as an expense if it is outside the accounting period, and monitor it off-balance sheet to urge collection. When collected, it shall be recorded as income.

Article 7. Expenses

The costs of the microfinance program include specific expenses as follows:

1. Interest payment expenses and similar expenses

a) Expenses for paying interest on mandatory savings deposits.

b) Expenses for paying interest on voluntary savings deposits.

c) Expenses for paying loan interest.

d) Other expenses for credit activities.

2. Service activity expenses

a) Telecommunication service expenses.

b) Expenses for commission fees for lending entrusted funds.

c) Expenses for financial advisory services related to microfinance activities.

d) Commissions paid to agents, brokers, and trustees for permitted agency, brokerage, and trustee activities. Among these, for brokerage commissions, the following provisions apply:

- The microfinance program may pay brokerage commissions for permitted brokerage activities.

- Brokerage commissions paid to third parties (as intermediaries) shall not be applied to agents of the microfinance program; nor to management positions or employees of the microfinance program.

- Payment of brokerage commissions must be based on a contract or confirmation between the microfinance program and the recipient of the brokerage commission, which must include basic contents such as the name of the recipient, the nature of the expenditure, the amount, the method of payment, the start and end dates, and the responsibilities of each party.

- For brokerage expenses for leasing assets (including seized assets and debt-settlement assets, if any): the maximum brokerage commission for leasing each asset by the microfinance program shall not exceed 5% of the total amount received from leasing that asset through brokerage in the year.

- For brokerage expenses for selling collateralized or pledged assets: the brokerage commission for selling each collateralized or pledged asset by the microfinance program shall not exceed 1% of the actual value received from selling that asset through brokerage.

- The microfinance program shall establish a uniform and public regulation for paying brokerage commissions.

đ) Expenses for acting as an agent in providing insurance services.

3. Foreign exchange differences in accordance with accounting standards and current legal regulations.

4. Contributions and fees for supporting operational, management, and training activities for political organizations, political-social organizations, and non-governmental organizations.

5. Sponsorship for programs, projects, organizations, and individuals engaged in community support activities consistent with the objectives of the microfinance program.

6. Payments for taxes, fees, and levies as prescribed by law.

7. Expenses for staff and employees as prescribed by law, including:

a) Wages, salaries, and wage-like allowances, including:

- Salaries for members of the Management Board, Steering Committee, Director, Supervisory Board, and remuneration for members;

- Salaries and allowances for staff and employees of the microfinance program based on labor contracts or collective labor agreements.

b) Social security contributions: payments for social insurance, health insurance, unemployment insurance, and union dues.

c) Unemployment benefits paid to workers according to labor laws.

d) Allowances for managers and workers who are seconded by political organizations, political-social organizations, and non-governmental organizations to work concurrently at the microfinance program.

đ) Purchase of personal accident insurance.

e) Occupational safety and health expenses for those required to wear protective gear while working.

g) Uniforms for staff and employees working in the microfinance program according to established regulations.

h) Meal expenses.

i) Medical expenses, including regular medical check-up expenses for workers, purchase of preventive medicines, and other medical expenses as prescribed by law.

k) Other expenses for workers as prescribed by law:

- Expenses according to regulations for female workers;

- Pay annual leave allowance in accordance with the provisions of the law;

- Welfare expenses directly provided to workers as stipulated by corporate income tax laws;

- Other expenses.

8. Expenses for management and administrative activities

a) Material and printing expenses.

b) Travel expenses and fuel costs.

c) Training and capacity-building expenses for staff and employees, including training for volunteers and clients within the scope of microfinance activities.

d) Postage and telephone expenses.

đ) Expenses for publicity, advertising, marketing, and promotional activities.

e) Purchase of literature and books.

g) Electricity and water expenses, office cleaning expenses.

h) Conference, reception, ceremonial, and external transaction expenses.

i) Consulting and expert hiring expenses both domestically and internationally.

k) Audit expenses.

l) Other expenses:

- Security expenses, fire prevention and extinguishing expenses, security, and defense expenses;

- Environmental protection expenses: If the annual expenses are significant and effective over multiple years, they can be allocated to subsequent years according to the principle that the allocation period does not exceed the number of years during which the environmental protection expenses yield benefits, and the allocation does not result in a loss in the financial performance of the year being allocated.

- Other expenses as prescribed by law.

9. Expenses for assets:

a) Depreciation expenses for fixed assets used in business activities shall be implemented according to the management, use, and depreciation accrual system for enterprises.

b) Maintenance and repair expenses for fixed assets.

c) Purchase and repair expenses for tools and equipment.

d) Asset insurance expenses.

đ) Other asset-related expenses as prescribed by law.

10. Expense allocations for reserves as prescribed in Clause 5, Article 4 of this Circular.

11. Rental expenses for external assets.

12. Other expenses

a) Membership fees for industry associations that the microfinance program participates in, as set by those associations.

b) Party and mass organization work expenses at the microfinance program (excluding funding from party and mass organization budgets).

c) Expenses for selling or liquidating assets (if any), including the residual value of fixed assets sold or liquidated.

d) Expenses for recovering written-off debts, costs for recovering bad debts include expenses for recovering debts, including payment for service fees for debt recovery services provided by organizations permitted to perform such services under the law, and costs for implementing the purchase and sale of debts.

đ) Expenses for processing remaining asset losses: programs and projects TCVM shall record the value of remaining losses after compensating with personal, collective, or insurance organization compensation payments; using reserves established within expenses.

e) Expenses for revenues that have been recorded but not actually received.

g) Social work expenses as prescribed by law.

h) Penalties for administrative violations, excluding penalties that individuals must pay according to the law.

i) Other expenses:

- Expenses for debts payable where the creditor has been identified as lost and recorded as income but later the creditor is re-identified;

- Expenses for fines and compensation due to economic contract breaches within the responsibility of the program, project TCVM;

- Litigation fees and execution fees within the responsibility of the program, project TCVM;

- Other expenses as prescribed by law.

Article 8. Principles of Expense Recognition

1. The determination of expenses for calculating corporate income tax shall be carried out in accordance with the provisions of the Law on Corporate Income Tax and guiding documents of the Law on Corporate Income Tax.

2. Expenses of the program, project TCVM are actual expenses incurred during the period related to the business activities of the program, project TCVM.

3. Expenses recorded as operating expenses of the program, project TCVM must comply with the principle of matching revenue and expenses and have valid invoices and legal supporting documents as prescribed by law. Programs and projects TCVM shall not record expenses funded by other sources. The determination and recording of expenses must be consistent with Vietnamese accounting standards and relevant legal provisions.

Article 9. Tax, fee, and surcharge policy

Programs and projects TCVM shall implement tax, fee, and surcharge regulations as prescribed by law.

Article 10. Profit Distribution

Remaining profits of programs and projects TCVM after covering previous year losses (if any) and fulfilling state budget obligations as prescribed by law shall be decided by the program, project TCVM but must ensure the principle that profits may not be distributed or used for non-microfinance activities in any form.

Article 11. Responsibilities of management agencies and programs, projects civil judgment

1. The Ministry of Finance shall issue and resolve financial system, accounting, and financial reporting issues for programs and projects TCVM.

2. The State Bank of Vietnam shall lead the supervision of the implementation of the financial system of programs and projects TCVM; annually report to the Ministry of Finance on the financial situation of programs and projects TCVM and any violations of the financial system discovered during inspection, audit, and supervision (if any). The State Bank of Vietnam shall send the report to the Ministry of Finance before March 31 of the following year.

3. Political organizations, political-social organizations, and non-governmental organizations

a) Political organizations, political-social organizations, and non-governmental organizations with programs and projects TCVM shall fulfill responsibilities as stipulated in Article 20 of Decision No. 20/2017/QĐ-TTg.

b) Report as prescribed in Article 14 of Decision No. 20/2017/QĐ-TTg and relevant laws, and bear full responsibility for the accuracy and truthfulness of these reports.

4. Programs and projects TCVM

a) Implement the financial system as prescribed in Decision No. 20/2017/QĐ-TTg; specific guidance contents in this Circular and other legal documents on financial management.

b) Implement reporting systems and fully bear legal responsibility for the completeness, timeliness, and accuracy of reported data as prescribed in Decision No. 20/2017/QĐ-TTg and guidance in this Circular.

Chapter III

IMPLEMENTING PROVISIONS

Article 12. Effective Date

This Circular takes effect from August 9, 2019.

2. Any difficulties encountered during implementation should be reported to the Ministry of Finance for study, consideration, and resolution./.