Circular No. 93/2004/TT-BTC guiding certain contents of the regulations on the establishment, organization, and operation of credit guarantee funds for small and medium-sized enterprises (Content Attached)

CIRCULAR

Guidelines for certain contents of the Regulation on the establishment, organization, and operation

of the Credit Guarantee Fund for small and medium enterprises

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Pursuant to Decree No. 77/2003/ND-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decision No. 193/2001/QĐ-TTg dated December 20, 2001 of the Prime Minister promulgating the Regulation on the establishment, organization, and operation of the Credit Guarantee Fund for small and medium enterprises;

Pursuant to Decision No. 115/2004/QĐ-TTg dated June 25, 2004 of the Prime Minister amending and supplementing the Regulation on the establishment, organization, and operation of the Credit Guarantee Fund for small and medium enterprises issued pursuant to Decision No. 193/2001/QĐ-TTg dated December 20, 2001 of the Prime Minister;

The Ministry of Finance issues guidelines for implementing certain contents as follows:

PART I

ESTABLISHMENT, ORGANIZATION, AND MANAGEMENT OF THE CREDIT GUARANTEE FUND

1. Conditions for establishing the Credit Guarantee Fund

- Having a project to establish the Credit Guarantee Fund that has been approved by the Chairman of the People's Committee of the province or centrally governed city. The content of the project must demonstrate the need for credit guarantees for small and medium enterprises operating in the locality, and the organizational and operational plan of the Credit Guarantee Fund in the first three years is feasible.

- Having a minimum charter capital of 30 billion VND provided by the provincial or centrally governed city budget and contributions from organizations and individuals both within and outside the country.

- Having a list of proposed members of the Management Board, Supervisory Board, and Executive Board who have full civil capacity, university degrees, and at least five years of experience working in economic or financial-banking fields.

- Having a draft charter consistent with Article 6 of the Regulation on the establishment, organization, and operation of the Credit Guarantee Fund issued together with Decision No. 193/2001/QĐ-TTg of the Prime Minister and other relevant laws.

2. Procedures for establishing the Credit Guarantee Fund

- Based on the need for credit guarantees for small and medium enterprises in the locality, the Chairman of the People's Committee of the province or centrally governed city issues a decision to establish a preparatory board for the Credit Guarantee Fund (referred to as the preparatory board).

The preparatory board consists of representatives from the Department of Finance, the Department of Planning and Investment, the branch of the State Bank, and representatives of organizations supporting small and medium enterprises.

The preparatory board is responsible for assisting the Chairman of the People's Committee of the province or centrally governed city in researching and drafting the project to establish the Credit Guarantee Fund, preparing conditions for its establishment, and submitting them for consideration and decision by the Chairman of the People's Committee of the province or centrally governed city.

The preparatory board will dissolve itself after the Chairman of the People's Committee of the province or centrally governed city issues a decision to establish the Credit Guarantee Fund.

Based on the conditions for establishing the Credit Guarantee Fund, the Chairman of the People's Committee of the province or centrally governed city considers and decides on the establishment of the Credit Guarantee Fund in the locality.

Within fifteen days from the date the Credit Guarantee Fund officially commences operations, the Chairman of the People's Committee of the province or centrally governed city is responsible for reporting to the Ministry of Finance on the establishment of the Credit Guarantee Fund in their locality. Attached are copies of related documents including:

The decision to establish the Credit Guarantee Fund and the charter of the Credit Guarantee Fund that have been approved.

The project to establish the Credit Guarantee Fund that has been approved.

Related documents proving the fulfillment of conditions for establishing the Credit Guarantee Fund such as: Documents and decisions of agencies participating in contributing capital to establish the Fund; University diplomas of staff members responsible for management, supervision, and operation.

3. Conditions for conducting operations of the Credit Guarantee Fund

At the latest six months from the date of receiving the decision to establish the Credit Guarantee Fund from the Chairman of the People's Committee of the province or centrally governed city, the Credit Guarantee Fund must commence operations. At least thirty days before commencing operations, the Credit Guarantee Fund must publish in newspapers or announce through local mass media for three consecutive times about the decision to establish the Credit Guarantee Fund, the content of its activities, scope of activities, and target customers.

4. Organizational structure and management of the Credit Guarantee Fund

4.1. Based on Decision No. 115/2004/QĐ-TTg and the conditions and capabilities of each locality, the Chairman of the People's Committee of the province or centrally governed city shall consider and decide on the organizational structure and management of the Credit Guarantee Fund according to one of the following models:

a) Establishing the Credit Guarantee Fund with independent legal personality including the Management Board, Supervisory Board, and Executive Board as stipulated currently. The Credit Guarantee Fund entrusts the management and operation of guarantee activities to a unit entrusted, which can be the Development Support Fund or the local financial fund. The Credit Guarantee Fund and the entrusted unit must sign a service entrustment contract specifying the entrusted tasks; responsibilities and rights of each party; entrustment fees and payment methods; contract duration; information reporting system; dispute resolution and risk handling mechanisms; and other terms.

b) Not establishing the Credit Guarantee Fund with independent legal personality. The Chairman of the People's Committee of the province or centrally governed city issues a decision assigning the task of providing credit guarantees for small and medium enterprises to the local financial fund.

4.2. Local financial funds that manage and operate the Credit Guarantee Fund (in the form of entrustment or being assigned the task of providing credit guarantees) must meet the following conditions:

Having independent legal personality and an independent organizational structure.

In their functional and operational duties, they must include lending activities to customers.

The leadership of the Fund and staff responsible for providing credit guarantees for small and medium enterprises must have university degrees and at least five years of experience in the financial-banking field.

The financial situation of the unit must be sound, with positive net income over the last two consecutive years.

In cases where an independent credit guarantee fund is not established, the Chairman of the People's Committee of the province or centrally governed city shall issue a decision assigning the task of providing credit guarantees to small and medium-sized enterprises to the local financial fund, in which case the minimum additional capital required for the local financial fund to perform the credit guarantee task shall be 30 billion VND (from the local budget allocation and contributions from organizations).

4.3. Basic contents regarding the responsibilities and authorities of the credit guarantee fund and the entrusted unit in the entrustment contract.

a) For the credit guarantee fund.

Establish regulations and operational procedures to guide the operational activities of the credit guarantee fund transferred to the entrusted unit as a basis for implementation.

Provide information on customer credit guarantee policies during each period for the entrusted unit to consider accepting applications for credit guarantee issuance.

Authorize the entrusted unit to exercise the rights and obligations of the credit guarantee fund in issuing credit guarantees to customers as stipulated in Point 1, Article 21 of Decision 193/2001/QĐ-TTg. Authorize the entrusted unit to sign mandatory loan contracts with customers, recover principal and interest from customers.

Pay the entrusted unit service fee according to the entrustment contract.

Monitor and supervise the entrusted unit in implementing the regulations and operational procedures of the credit guarantee fund.

Transfer sufficient funds to the entrusted unit to fulfill the commitment to provide guarantees to financial institutions.

b) For the entrusted unit handling credit guarantee operations.

The entrusted units of the credit guarantee fund are responsible for fully performing all credit guarantee operations of the credit guarantee fund in accordance with the provisions, including:

Receiving and reviewing applications in accordance with the credit guarantee regulations and procedures of the credit guarantee fund to decide on granting or rejecting credit guarantees to customers.

Be authorized to exercise the rights and obligations of the credit guarantee fund in issuing credit guarantees to customers as stipulated in Point 1, Article 21 of Decision 193/2001/QĐ-TTg.

Fulfill the guarantee commitment immediately upon receiving funds from the credit guarantee fund. When fulfilling the guarantee commitment for customers, the entrusted unit requires the customer to accept a mandatory loan at an interest rate equal to 150% of the lending rate under the credit contract signed with the financial institution. The entrusted unit is responsible for recovering the principal and interest of the mandatory loans.

Report comprehensively on the operational management situation to the credit guarantee fund periodically and urgently as requested by the credit guarantee fund. Specifically, for mandatory loans, the entrusted unit is responsible for reporting monthly to the credit guarantee fund on the financial status of the debtor, collection status, and collection potential.

Perform other tasks agreed between the credit guarantee fund and the entrusted unit.

Enjoy the service fee according to the agreement with the credit guarantee fund.

4.4. Basic tasks of the local financial fund when assigned the task of providing credit guarantees.

Manage and utilize the capital of the credit guarantee fund in accordance with the regulations.

Provide credit guarantees to small and medium-sized enterprises in accordance with Decision 193/2001/QĐ-TTg and other relevant legal regulations.

Manage income, expenses, and distribute the difference between income and expenditure for credit guarantee activities in accordance with this Circular.

5. Credit Guarantee Contract

The credit guarantee contract is negotiated and signed by the operational management agency of the credit guarantee fund with the financial institution accepting the guarantee and the guaranteed customer. The contents of the credit guarantee contract include the following basic items:

Name and address of the operational management agency of the credit guarantee fund, the financial institution accepting the guarantee, and the guaranteed customer.

Purpose, objects, and scope of guarantee.

Total value of loans from customers at credit institutions.

Total value of collateral and pledges at credit institutions.

Amount of guarantee, term of guarantee, guarantee fee, and method of collecting guarantee fee.

Rights and obligations of parties involved in the guarantee contract.

Provisions on debt recognition and indemnification for guarantees.

Resolution of disputes arising.

Other agreements.

The credit guarantee contract may be amended, supplemented, or rescinded if the relevant parties agree.

The credit guarantee contract terminates in the following cases:

The guarantee obligation has been fully performed by the management body of the Credit Guarantee Fund, and the customer has fully performed their obligations to the management body of the Credit Guarantee Fund.

The guarantee obligation terminates according to the provisions of the law.

The customer has fully performed their obligations towards the credit institution and the management body of the Credit Guarantee Fund.

The term of the credit guarantee has expired as stipulated in the guarantee contract.

The credit institution agrees to rescind the guarantee in accordance with the provisions of the law.

The guarantee is replaced by another collateral measure provided by the customer at the credit institution upon agreement of the parties.

PART II

MANAGEMENT OF THE CREDIT GUARANTEE FUND

I. In the case of establishing a Credit Guarantee Fund with independent legal status, the operation of the Credit Guarantee Fund shall be entrusted to the Development Support Fund or the local Financial Fund.

1. Provisions on the management of capital and assets of the Credit Guarantee Fund

1.1. The operating capital of the Credit Guarantee Fund is formed from the following sources:

a) Registered capital: The total amount of capital contributed by organizations and individuals and recorded in the charter of the Credit Guarantee Fund. The registered capital of the Credit Guarantee Fund is formed from:

Capital granted by the provincial or centrally-administered municipal budget.

Capital contributions from credit institutions.

Capital contributions from enterprises of all economic sectors.

Capital contributions from industry associations, representative organizations, and support organizations for small and medium-sized enterprises.

b) Capital sponsorship from organizations and individuals both within and outside the country (including Official Development Assistance - ODA) for the purpose of developing small and medium-sized enterprises, cooperatives, and agricultural, forestry, and fisheries development programs.

c) Additional capital from the results of the operations of the Credit Guarantee Fund.

1.2. The operating capital of the Credit Guarantee Fund must be used for its intended purposes, effectively, safely, and for the following objectives:

Providing credit guarantees to customers as prescribed.

Investing in and purchasing fixed assets to serve the operations of the Credit Guarantee Fund according to the principle that the remaining value of fixed assets does not exceed 7% of the registered capital of the Fund. All investment and procurement activities of fixed assets of the Credit Guarantee Fund must be carried out in accordance with state regulations on investment management and construction. Each year, the Credit Guarantee Fund must develop an investment and procurement plan for fixed assets to be reviewed and approved by the Management Board and implemented within the approved plan.

Deposited at the State Treasury and domestic credit institutions located in the same province or centrally-administered municipality.

Purchasing government bonds.

Fulfilling the commitment guarantee obligations of the Fund to credit institutions when customers fail to repay debts or repay debts incompletely to credit institutions.

1.3. Business reserve fund.

The business reserve fund is established from costs equal to 50% of the guarantee fees collected from customers. The business reserve fund is used for:

Compulsory lending to customers based on the portion of the guarantee commitment responsibility of the Fund in the event that customers cannot repay debts or repay debts overdue to credit institutions. The amount of compulsory loans recovered by the Credit Guarantee Fund will be reimbursed into the business reserve fund.

Covering losses from loans made compulsorily to customers but not recovered. The financial handling of loans made compulsorily but not recovered by the Credit Guarantee Fund is carried out according to the regulations issued by the Management Board of the Fund.

In the event that the business reserve fund is insufficient to provide compulsory loans to customers and cover losses from loans made compulsorily but not recovered, the Credit Guarantee Fund may use its operating capital to fulfill the commitment guarantee obligations on behalf of the customer.

1.4. The Credit Guarantee Fund implements accounting bookkeeping, monitoring all current capital and assets; handling cases of damage, loss of assets; selling, liquidating assets; inventory, valuation of assets in accordance with the laws applicable to state-owned enterprises and related regulatory documents.

2. Income of the Credit Guarantee Fund

The income of the Credit Guarantee Fund includes actual receipts in the year, including:

Guarantee fee income.

Fee income for reviewing applications for credit guarantees.

Interest income from deposits at the State Treasury and domestic credit institutions.

Interest income from government bond investments.

Interest income from overdue loans (compulsory loans) to customers.

Other income, including income from the sale and liquidation of fixed assets.

All revenues of the Credit Guarantee Fund must be fully recorded in income and must have valid invoices and supporting documents.

3. Expenses of the Credit Guarantee Fund: These are necessary expenses for the operation of the Credit Guarantee Fund, supported by valid invoices and supporting documents. The level of expenditure and the objects of expenditure are implemented in accordance with the provisions of the law. In cases where the law has not yet provided for such provisions, the Credit Guarantee Fund bases its budget standards and decisions on financial capacity and bears legal responsibility. All expense items must be within the annual financial plan approved by the Management Board, including:

3.1. Expenses for guarantee operations.

Payment of service fees to the entrusted unit for credit guarantees under the service entrustment contract between the two parties.

Establishment of the business reserve fund.

Other expenses incurred during the provision of credit guarantees to customers.

3.2. Expenses for personnel include:

Costs for salaries, wages, and other expenses having the nature of salaries and wages for cadres and staff.

Allowances for members of the Management Board and Supervisory Board working on a part-time basis.

Expenses for meal allowances, female worker allowances, labor protection expenses, transaction attire expenses, and termination benefits for workers as stipulated by current regulations.

Social insurance costs, health insurance costs, and trade union fees.

3.3. Expenses for administrative management activities:

Office supplies purchase expenses: materials, printing paper, stationery.

Postal and telecommunication service charges.

Electricity and water expenses, office sanitation, environmental protection, and office healthcare expenses.

Fuel expenses serving the operations of the agency.

Travel expenses for officials traveling domestically and internationally according to prescribed regulations.

Reception, external transactions, ceremonial events, conferences, publicity, and advertising expenses.

Training, seminar, and scientific research expenses.

Other management expenses.

3.4. Expenses related to assets.

Depreciation expenses for fixed assets shall be applied in accordance with the State's regulations for enterprises.

Insurance premiums for assets, maintenance and repair expenses for assets, asset rental expenses, and procurement of labor tools.

Expenses for the sale and liquidation of assets (including the remaining value of liquidated and sold assets).

3.5. Expenses for tax payments, fees, and levies.

3.6. Other reasonable and legitimate expenses as provided for in the Law on Corporate Income Tax and guiding documents.

4. Revenue and Expense Differential: The revenue and expense differential realized in a year by the Credit Guarantee Fund shall be determined as the difference between total income and total legitimate and reasonable expenses after tax payment, which shall be handled as follows:

4.1. In the case where income exceeds expenses.

Set aside 15% to establish a supplementary operational capital reserve fund for the Credit Guarantee Fund.

Set aside 10% to form a financial reserve fund. The financial reserve fund is used to offset losses and damages to assets occurring during the operation of the Credit Guarantee Fund after being compensated by organizations and individuals causing the loss, by insurance organizations, and by the business reserve fund.

Set aside 30% to form a development investment fund. The development investment fund is used to invest in expanding the scale of operations and updating equipment and working conditions of the Credit Guarantee Fund.

Establish two reward and welfare funds up to a maximum of three months' salary realized in the year.

The reward fund is used to periodically or unexpectedly reward employees working in the Credit Guarantee Fund; to reward individuals and organizations outside the Credit Guarantee Fund that have economic relations with the Credit Guarantee Fund and have effectively contributed to its operations.

The welfare fund is used to invest in building or repairing welfare facilities of the Credit Guarantee Fund. Expenses for sports, cultural welfare public activities of the staff of the Credit Guarantee Fund. Assistance for regular and emergency hardship cases for employees of the Credit Guarantee Fund.

The remainder is used to distribute profits to organizations participating in the establishment of the Credit Guarantee Fund.

4.2. In the case where income is less than expenses. The Credit Guarantee Fund may transfer the income differential less than expenses to the next year, with the transfer period not exceeding five years. After five years, if the income differential less than expenses has not been fully transferred, the Credit Guarantee Fund shall report to the Chairman of the Provincial People's Committee for consideration and decision on reducing operational capital, restructuring, or dissolving the Credit Guarantee Fund.

5. Tax Obligations of the Credit Guarantee Fund

The credit guarantee activities of the Credit Guarantee Fund are exempt from value-added tax.

Other taxes, fees, and levies arising during the operation of the Credit Guarantee Fund shall be implemented according to current laws.

6. Accounting System for the Credit Guarantee Fund

The accounting and tracking of guarantees issued by the Credit Guarantee Fund shall be carried out according to the accounting system issued by the Ministry of Finance.

II. In the case where a Credit Guarantee Fund with independent legal status is not established, the Chairman of the Provincial People's Committee assigns credit guarantee tasks to the local financial fund:

The local financial fund is responsible for accounting and tracking all operational capital of the Credit Guarantee Fund separately. The operational capital of the Credit Guarantee Fund must be used for specific purposes, effectively, and for the following objectives:

Providing credit guarantees to customers as prescribed.

Up to 7% of the operational capital of the Credit Guarantee Fund can be used to supplement investment capital and purchase fixed assets to serve the operations of the local financial fund.

Deposited at the State Treasury and domestic credit institutions located in the same province or centrally-administered municipality.

Purchasing government bonds.

Fulfilling the commitment guarantee obligations of the Fund to credit institutions when customers fail to repay debts or repay debts incompletely to credit institutions.

All revenues and expenses of the Credit Guarantee Fund shall be consolidated into the revenues and expenses of the local financial fund to determine the revenue and expense differential of the local financial fund. The local financial fund is responsible for setting up the following funds through expense allocation:

Set aside 50% of the actual collected credit guarantee fees to form a business reserve fund. The business reserve fund shall be used as stipulated in point 1.3 of Section I above.

Set aside 15% of the actual collected credit guarantee fees to form a supplementary operational capital reserve fund for the Credit Guarantee Fund.

The credit guarantee activities of the Credit Guarantee Fund are exempt from value-added tax. The local financial fund is responsible for declaring and paying other types of taxes, fees, and levies arising during the operation according to current laws.

CHAPTER III

INFORMATION REPORTING AND AUDIT REGIME

1. For Customers

Customers are responsible for reporting to the operational management authority of the Credit Guarantee Fund and are subject to periodic or unexpected audits by the operational management authority of the Credit Guarantee Fund regarding their activities related to guaranteed transactions. The content of the report and audit procedures of the Credit Guarantee Fund are agreed upon by the parties and recorded in the Credit Guarantee Contract.

2. For the Credit Guarantee Fund

The reporting on the operation status of the Credit Guarantee Fund for organizations and individuals contributing capital to the Fund shall be carried out in accordance with the Charter of the Fund.

The Credit Guarantee Fund is responsible for compiling the status of credit guarantee operations, general operational status to prepare and submit to the People's Committee of the province/city under central government jurisdiction and the Ministry of Finance quarterly and annually the following reports:

Balance sheet at level III, financial income and expenditure report. The report form is established according to the State regulations applicable to enterprises.

Status of credit guarantees provided to customers, status of mandatory loan arrears and recovery capability according to the attached form.

Local financial funds entrusted with the responsibility of providing credit guarantees are responsible for reporting on their operational status and financial statements in accordance with the regulations applicable to local financial funds. In addition to the aforementioned reports, local financial funds are also responsible for reporting to the People's Committee of the province/city under central government jurisdiction and the Ministry of Finance quarterly and annually on the sources of the Credit Guarantee Fund’s capital, the status of credit guarantees provided to customers, the status of mandatory loan arrears and recovery capability, and other reports when required.

Deadline for submitting reports: Quarterly reports must be submitted no later than 45 days from the end of the quarter. Annual reports must be submitted no later than 60 days from the end of the year.

The Credit Guarantee Fund is subject to inspection and audit by the People's Committee of the province/city under central government jurisdiction, the Ministry of Finance, and related agencies in accordance with current laws.

3. For entrusted units.

Entrusted units are responsible for periodically and urgently reporting to the Credit Guarantee Fund on the management and operation status of the Credit Guarantee Fund activities in accordance with point 4, Chapter I of this Circular.

PART IV

DISPUTES - LITIGATION - DISSOLUTION - LIQUIDATION

1. All disputes and litigation between the Credit Guarantee Fund and legal entities and natural persons directly or indirectly related to the activities of the Credit Guarantee Fund shall be resolved in accordance with the current laws of the Socialist Republic of Vietnam.

2. The restructuring or dissolution of the Credit Guarantee Fund shall be implemented based on the decision of the Chairman of the People's Committee of the province/city under central government jurisdiction and the current legal provisions applicable to enterprises.

CHAPTER V

IMPLEMENTATION

1. The Chairman of the People's Committee of the province/city under central government jurisdiction and the Chairman of the Management Board of the Credit Guarantee Fund are responsible for implementing the establishment, organization, and operation regulations of the Credit Guarantee Fund issued pursuant to Decision No. 193/2001/QĐ-TTg, Decision No. 115/2004/QĐ-TTg of the Prime Minister and the guidance content in this Circular.

Periodically and urgently, the Chairman of the People's Committee of the province/city under central government jurisdiction shall report to the Ministry of Finance on the results and operational status of the Credit Guarantee Fund in the locality, and propose solutions to address difficulties in the operation of the Fund.

2. The Credit Guarantee Fund is responsible for issuing specific operational guidelines in accordance with Decision No. 193/QĐ-TTg, Decision No. 115/2004/QĐ-TTg of the Prime Minister and the guidance content in this Circular.

3. During the implementation process, the Ministry of Finance will inspect and supervise the establishment, organization, operation, and compliance with national legal regulations of the Credit Guarantee Funds in provinces/cities under central government jurisdiction.

4. This Circular takes effect 15 days from the date of publication in the Official Gazette and replaces Circular No. 42/2002/TT-BTC dated May 7, 2002, of the Ministry of Finance. Any issues encountered during implementation should be reported to the Ministry of Finance for review, supplementation, and amendment./.