Decree No. 78/2002/ND-CP on credit for poor people and other policy beneficiaries

DECREE
On credit for the poor and other policy beneficiaries

THE GOVERNMENT

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

This Decision is based on Decree No. 63/1998/ND-CP dated August 17, 1998 of the Government on foreign exchange management and Decree No. 05/2001/ND-CP dated January 17, 2001 of the Government amending and supplementing certain provisions of Decree No. 63/1998/ND-CP dated August 17, 1998 of the Government on foreign exchange management;

Pursuant to Resolution No. 31/1999/QH10 of the National Assembly, tenth session, sixth meeting;

Considering the proposal of the Governor of the State Bank of Vietnam, the Minister of Finance, the Minister of Planning and Investment, the Minister of Labor, Invalids and Social Affairs, the Minister of Interior, and the Chairman of the Office of the Government.

DECREE:

Chapter 1:

GENERAL PROVISIONS

Clause 4 of Article 6Credit for the poor and other policy beneficiaries refers to the use of financial resources mobilized by the State to provide preferential loans to the poor and other policy beneficiaries for production, business activities, job creation, and improvement of living standards; contributing to the implementation of the National Target Program on Poverty Reduction and Social Stability.

Article 2. The poor and other policy beneficiaries eligible for preferential credit include:

1. Poor households.

2. Students and trainees with difficult circumstances currently studying at universities, colleges, vocational high schools, and vocational training programs.

3. Individuals and organizations requiring loans to create employment as stipulated in Resolution 120/HĐBT dated April 11, 1992 of the Council of Ministers (now the Government).

4. Policy targets going abroad for temporary work.

5. Economic organizations and households engaged in production and business located in islands, mountainous areas classified as Zone II and Zone III, and under the Special Difficult Commune Development Program (hereinafter referred to as Program 135).

6. Other targets when decided by the Prime Minister.

Article 3. When borrowing according to the provisions of this Decree, the poor and other policy beneficiaries (hereinafter referred to as Borrowers) shall not be required to collateralize assets, except for economic organizations specified in Clauses 3 and 5 of Article 2 of this Decree. Poor households are exempted from administrative fee charges for loan procedures.

The guarantee for loans provided to economic organizations specified in Clauses 3 and 5 of Article 2 of this Decree shall be implemented in accordance with the regulations of the Management Board of the Social Policy Bank. 

Article 4.

1. Establishing the Social Policy Bank to implement preferential credit for the poor and other policy beneficiaries based on restructuring the Poverty Service Bank established pursuant to Decision No. 230/QĐ-NH5 dated September 1, 1995 of the Governor of the State Bank of Vietnam.

2. Activities of the Social Policy Bank shall not be for profit-making purposes, guaranteed by the State for payment capacity; the reserve requirement ratio is 0% (zero percent); not required to participate in deposit insurance; exempted from taxes and other payments to the State budget.

3. The Social Policy Bank shall carry out operations such as capital raising, lending, settlement, treasury management, and accepting entrusted funds for preferential lending from local authorities, economic organizations, political-social organizations, associations, clubs, non-governmental organizations, individuals both within and outside the country for local economic and social development programs.

4. The Social Policy Bank shall have a unified management and operation system nationwide; it is a legal entity with registered capital, assets, seals, and a transaction network from central to local levels.

5. Governance of the Social Policy Bank shall be through a Management Board. The Management Board shall have representative boards at provincial and centrally-administered city levels; district, county, town, and city levels within provinces.

6. Operation of the Social Policy Bank shall be managed by the General Director.

Article 5. The lending activities of the Social Policy Bank shall be carried out through entrusting credit institutions and political-social organizations with lending tasks via entrustment contracts or directly lending to Borrowers. 

Loans to poor households shall be based on the assessment results of the Savings and Loan Groups. Savings and Loan Groups are organizations voluntarily established by political-social organizations or community residents within the administrative boundaries of communes, approved in writing by the commune People's Committee. The activities of Savings and Loan Groups shall be guided by the Social Policy Bank.

Article 6. Financial systems, salary scales, and allowances for staff members, and the establishment and utilization of various funds of the Social Policy Bank shall be decided by the Prime Minister.

Chapter 2:
SOURCES OF CAPITAL

Article 7. Capital from the State Budget

1. Registered capital;

2. Capital for poverty reduction, job creation, and other social policies;

3. Annually, local people's committees at all levels may allocate a portion of their increased revenue and savings in the budget to increase the capital for lending to the poor and other policy beneficiaries in their respective areas;

4. Official Development Assistance (ODA) capital assigned by the Government.

Article 8. Raised funds

1. Accept interest-bearing deposits from domestic and foreign organizations and individuals within the annual plan approved;

2. State credit institutions shall maintain a balance of deposits at the Social Policy Bank equal to 2% of the balance of domestic currency mobilized sources at the end of December of the previous year. Any changes to this deposit maintenance ratio shall be decided by the Prime Minister. Deposits of state credit institutions at the Social Policy Bank shall be paid interest based on the average annual interest rate of the credit institution plus a reasonable deposit fee agreed upon by both parties;

3. Voluntary interest-free deposits from domestic and foreign organizations and individuals;

4. Issuing government-guaranteed bonds, deposit certificates, and other securities;

5. Mobilizing savings from the poor.

Article 9. Borrowed capital 

1. From financial and credit institutions both domestically and internationally;

2. From Postal Savings and Social Insurance Vietnam;

3. From the State Bank.

Article 10. Voluntary contributions without repayment from individuals, economic organizations, financial and credit organizations, political-social organizations, associations, clubs, and non-governmental organizations both domestically and internationally.

Article 11. Entrusted capital for preferential lending from local authorities, economic organizations, political-social organizations, associations, clubs, non-governmental organizations, and individuals both domestically and internationally.

Article 12. Other sources of capital.

Chapter 3:

LOANS

Article 13. Conditions for Borrowing

1. For Borrowers who are poor households, they must have a legal place of residence and be included in the list of poor households determined by the commune People's Committee according to the poverty standard announced by the Ministry of Labor, Invalids and Social Affairs, assessed and listed by the Savings and Loan Group with confirmation from the commune People's Committee.

2. The borrower shall be other policy beneficiaries who comply with the current regulations of the State and the provisions of this Decree.

Article 14. The borrowed capital shall be used for the following purposes:

1. For poor households and production and business households located in islands, areas II and III of mountainous regions, and communes under Program 135, the borrowed capital shall be used to:

a) Purchase materials, equipment, planting seeds, breeding animals, and pay for services supporting production and business activities;

b) Contributing capital to approved cooperative production and business projects;

c) Address part of the essential needs for housing, lighting, clean water, and education.

2. For economic organizations located in islands, areas II and III of mountainous regions, and communes under Program 135, the borrowed capital shall be used to cover costs for production and business activities according to approved programs and projects.

3. For students and trainees with difficult circumstances, using loan capital for purchasing educational tools and other expenses supporting their studies at school.

4. Borrowers who are policy targets going abroad for temporary work, using loan capital for training fees, service fees, deposits, and air tickets.

5. Borrowers who are other targets implement as decided by the Prime Minister.

6. The entrusted capital for preferential loans shall be used for the purposes requested by the entrusting party and recorded in the entrustment contract.

Article 15. Principles of Credit

1. The borrower must use the borrowed capital for the purpose applied for.

2. The borrower must repay the principal and interest on time.

Article 16. Loan amount

The amount of loan for each borrowing period shall be determined and announced by the Board of Directors of the Social Policy Bank based on the borrowing demand and the available funds that can be mobilized during each period.

Article 17. Loan Term, Debt Extension, and Overdue Debt Conversion

1. The loan term is determined based on the purpose of using the borrowed funds by the borrower and the repayment period of the program or project, taking into account the borrower's ability to repay.

2. In cases where the borrower cannot repay the debt on time due to objective reasons, the Social Policy Bank shall consider extending the repayment period.

3. In cases where the borrower misuses the borrowed capital, and although capable of repaying the due debt, fails to do so, the overdue debt shall be transferred. The lending organization shall cooperate with local authorities and social-political organizations to take measures to recover the debt.

4. The loan term, extension of the repayment period, and transfer of overdue debt shall be stipulated by the Board of Directors of the Social Policy Bank.

Article 18. Interest Rate for Loans

1. The preferential loan interest rate for each period shall be decided by the Prime Minister based on the proposal of the Board of Directors of the Social Policy Bank, unified nationwide except for economic organizations specified in Clause 3 and Clause 5, Article 2 of this Decree, which shall be decided by the Board of Directors of the Social Policy Bank with differentiated interest rates between Area II and Area III.

2. The overdue interest rate is calculated at 130% of the loan interest rate.

Article 19. The Social Policy Bank shall establish procedures and formalities for lending to each borrower ensuring simplicity, clarity, and ease of implementation.

Article 20. Credit Risk and Risk Management

1. In cases where the borrower cannot repay the debt due to objective reasons such as natural disasters, fires, epidemics, changes in state policies, and market price fluctuations, the situation shall be handled as follows:

a) In cases affecting a wide area, they shall be handled according to the decision of the Prime Minister;

b) In cases occurring individually or locally, the debt may be extended or resolved from the Risk Reserve Fund of the Social Policy Bank, subject to the decision of the Board of Directors.

2. Losses caused by subjective reasons of the borrower, the entrusted organization, or employees of the Social Policy Bank shall be compensated by these parties and they shall bear legal responsibility.

Chapter 4:

RESPONSIBILITIES OF STATE MANAGEMENT ORGANIZATIONS AND ORGANIZATIONS AND INDIVIDUALS PROVIDING SERVICES IN IMPLEMENTING SERVICE PRICES

Article 21. The Government Prime Minister

1. Direct the Ministry of Finance, the Ministry of Planning and Investment, and the State Bank of Vietnam to allocate sufficient charter capital when establishing and supplementing the charter capital for the Social Policy Bank.

2. Direct the Ministry of Finance and the Ministry of Planning and Investment to allocate plans to increase state budget capital for credit to the poor and other policy beneficiaries annually.

3. Decide on the use and transfer of Official Development Assistance (ODA) funds and foreign government loans for credit to the poor and other policy beneficiaries.

4. Decide on the issuance of government-guaranteed bonds to raise funds for the Social Policy Bank.

5. Decide on the handling of loans at risk due to widespread objective reasons.

Article 22. Ministries, agencies equivalent to ministries, and government agencies shall perform state management functions within their authority over the activities of the Social Policy Bank and create favorable conditions for its operations.

Article 23. Based on the National Target Program on Poverty Reduction and Job Creation, the Ministry of Finance shall lead and coordinate with the Ministry of Planning and Investment to allocate plans for lending capital and subsidies in the annual state budget estimates, five-year plans to be submitted to the Prime Minister.

Article 24. Agencies and organizations appointed to participate in the Board of Directors of the Social Policy Bank, in addition to their specialized management functions within their authority, shall have the responsibility to perform the following tasks:

1. Advise the Government and the Prime Minister on policies and basic solutions to implement preferential credit for the poor and other policy beneficiaries.

2. Directly guide the implementation of specialized solutions related to the activities of the Social Policy Bank.

3. Appoint representatives with appropriate authority to participate in the Board of Directors of the Social Policy Bank.

Article 25. The Chairman of the People's Committees of provinces and centrally-administered cities shall be responsible for:

1. Directing departments, branches, local poverty reduction steering committees, and district-level people's committees to collaborate with political-social organizations to integrate production and business programs, structural transformation programs, crop and livestock selection programs, technology transfer programs, industrial promotion, agricultural promotion, forestry promotion, fisheries promotion, and market guidance programs with the use of credit funds; combining economic programs with infrastructure construction programs and cultural-social programs to support borrowers in using credit funds effectively and minimizing risks.

2. Directing the implementation of the People's Council Resolution on allocating a portion of increased revenue and savings from the local state budget annually to the Social Policy Bank branch in accordance with Clause 3, Article 7 of this Decree.

3. Deciding on the establishment and supervision of the local representative council of the Board of Directors in accordance with the Charter on the organization and operation of the Social Policy Bank.

4. Directing entrusted organizations in the implementation of credit policies for borrowers in the locality, handling violations, and promptly rewarding organizations and individuals contributing to the activities of the Social Policy Bank.

5. Concentrate the sources of capital originating from the local budget that are currently being lent to poor households and other policy targets as stipulated in this Decree, including the Poverty Eradication and Livelihood Improvement Loan Fund established by the locality (if any), under the management of the Social Policy Bank.

6. Within the scope of their duties and authority, create favorable conditions for the operations of the Social Policy Bank.

Article 26. The Chairman of the People's Committee at the district level shall be responsible for:

1. Directing relevant departments and the Steering Board of the Poverty Eradication and Livelihood Improvement Program at the district level to coordinate with political and social organizations in effectively conducting propaganda, mobilization work, and creating conditions for implementing credit policies towards Borrowers within the area.

2. Directing the People's Committees at the commune level to fully comply with regulations on establishing Saving and Loan Groups, loan approval, confirming lists of poor households eligible for loans, inspecting and supervising the use of borrowed funds, repayment of principal and interest on loans by Borrowers.

3. Deciding on the establishment and monitoring the activities of the Representative Council of the Management Board according to the Charter on the organization and operation of the Social Policy Bank.

Article 27. The Chairman of the People's Committee at the commune level shall be responsible for:

1. Compiling lists of poor households based on poverty standards announced by the Ministry of Labor, War Invalids and Social Affairs.

2. Directing the establishment and approving the activities of Saving and Loan Groups.

3. Organizing and directing the Commune-level Steering Board of the Poverty Eradication and Livelihood Improvement Program to coordinate with political and social organizations in supervising the assessment of poor households and other policy targets eligible for loans, ensuring democracy and transparency, confirming lists of poor households borrowing funds, coordinating with lending organizations and Saving and Loan Groups to inspect the use of borrowed funds and urge the recovery of debts.

4. Providing opinions on Borrowers' requests for debt extension and risk handling.

5. Cooperating with functional agencies at the district level, political and social organizations, funding organizations, and lending organizations to organize training courses on agricultural techniques, animal husbandry, processing, market knowledge, loan and repayment regulations of the Social Policy Bank.

Article 28. Organizations and individuals who have achievements in establishing sources of capital and strictly adhering to loan regulations that yield practical benefits shall be rewarded. 

Annually, the Management Board and the Representative Council of the Management Board of the Social Policy Bank at all levels shall review and propose appropriate forms of reward.

CHAPTER V
IMPLEMENTING PROVISIONS

Article 29. This Decree shall take effect fifteen days from the date of signature.

Article 30.The Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairpersons of provincial people's committees under the central government shall be responsible for enforcing this Decree.