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Cooperative Bank of Vietnam assists People’s Credit Fund to develop new service products to serve its member in rural areas

Dr. Tran Quang Khanh – Chairman of the Board of the Cooperative Bank of Vietnam

After People’s Credit Fund system (PCFs) transferred its operation to the Credit Institution model of Cooperative (pursuant to the Law of Credit Institutions 2010) including the Cooperative Bank of Vietnam (Co-opBank) and PCFs, the systematic relationship between Co-opBank and PCFs has been more and more strengthened so that the operation of the whole system is constantly evolving.

As of 30th September 2014, the whole system has had 01 Co-opBank with the network of 27 branches and 67 Transaction departments serving 1,146 PCFs in 56/63 provinces and cities all over the country. At the present, PCFs have total equity of nearly 65,000 billion VND (of which mobilized capital accounts for nearly 57,000 billion VND), loan outstanding is nearly 50,000 billion VND (of which bad debt accounts for 0.97%), serving nearly 2 million members, most of whom are members that hardly have any access to the fund in other credit institutions, and many poor lenders in remote communes.

PCFs’ activity not only has economic value, but also has great social value. At the place where PCFs operates, people get more advantages in having more jobs, poverty reduction, repelling usury evil, which contributes to stabilize the economic, political and social order in rural areas… Especially, in many remote areas where the State and other credit institutions have difficulties in approaching to bring capital to the people, it is proven to be very suitable, as PCF model has promoted the spirit of self-motivation to solve difficulties and obstacles, while simultaneously carrying out effectively savings programs, mobilizing potential capital from local people to serve local investment, and using idle fund in the community.

However, current activities of PCFs have been merely mobilizing to lend to members, thus the affordability for the demands for banking service products needs to be more and more diversified, but it is still very limited for the economy in general as well as for the members in particular. This is one of the issues to be handled soon in order to keep promoting sustainable development of PCF in particular and the entire cooperative credit institution system in general.

Above achievement of PCF system, in addition to the efforts of PCFs themselves, is also caused by the vital contribution of the former Central Credit Fund or current Co-opBank. As the focal point of the system, Co-opBank is always a companion supporting PCFs timely in all aspects to help PCFs solve difficulties and obstacles, and together serve the development of agriculture and rural area.

In accordance with the Law on Credit Institutions in 2010, Co-opBank is the Bank of all PCFs, which is contributed to and established by PCFs and a number of legal entities under the provisions of the Law on Credit Institutions for the main purposes of providing system integration, financial assistance, capital allocation within PCF system. Since it is a characteristic of PCFs that operation is associated with agriculture and rural areas and members are farming households, Co-opBank’s operation is mainly associated with this area. It is affirmed that the establishment and development process of Co-opBank is always associated with the general development of PCFs for the key task of serving members that are households in agricultural production as well as contributing positively to support general food security for the entire PCF system all over the country.

To implement the Law on Credit Institutions in 2010 and “The proposal of restructuring of credit institutions for the period of 2010-2015” attached together with Decision No.254 / QD-TTg issued by the Prime Minister dated 1st March 2012, Co-opBank’s strategic orientation to 2020 is to complete and develop Co-opBank to be strong enough in scale, financial capacity, governance, and technology to actually play a role as the focal point in harmonizing and balancing capital for PCF system and to be able to support for PCFs effectively in professionals, capital and finance; while keeping expanding the Co-opBank branch network to the places with many PCFs to increase the abilities of financial integration, support and care for PCFs, assisting and promoting PCF system to grow and develop safely and sustainably. That is to become an important part of Vietnam Credit Institution system in order to contribute supplying capital demand to support agriculture and rural area development, limit the usury evil, ensure social security, sustainable poverty reduction, at once to contribute promoting the development of collective economic sector, in which co-operatives is core following the Party and State’s instruction.

Enhancing the integration power, Co-opBank support PCFs to develop service products to serve their members in rural area

Right after completion of operation model transformation in the mid 2013, Co-opBank has urgently designed and issued Co-opBank’s Regulation on capital harmony for PCFs and focused on implementing the work of capital harmony to facilitate PCFs’ activities via diversifying products of mobilization, particular lending with a variety of flexible terms from 1 to 12 months and preferential interest rate according to the type of maturity following the principles which are the mobilized interest rate from PCFs is always higher the mobilized interest rate from people and other credit institutions for the same maturity, at once the lending interest rate for PCFs is always lower than for customers who are enterprises, individuals for the same lending maturity in particular period.

In order to enhance the efficiency of capital use, Co-opBank has designed and supply a variety of lending products to PCFs, to serve PCFs’ diversified demand of loans such as: credit extending loans, project loans of agricultural and rural development, loan to teachers, syndication loans, co-sponsored loans between Co-opBank and PCFs… At the same time, it always pays attention to providing care and consultancy to PCFs to use funds in compliance with regulations to serve member’s demand in the province.

In addition to supporting to PCF to develop the traditional service products which is fund mobilization and lending, Co-opBank has paid attention to research, supply modern banking service product to PCFs such as ATM card, domestic debit card, remittance…, in particular to support PCFs providing money transfer service via CF-ebanking system of Co-opBank.

In order to implement this project, Co-opBank has collected resources to deploy a huge number of works as below:

To research to develop e-banking software system for transaction (short name is CF-ebank) to provide to PCFs.

– To design and promulgate the system of written documents, professional and technical processes to PCFs including: Regulations on payment remittance service to PCFs participated Co-opBank’s e-banking system; Regulations on management and usage of security lock code for PCFs participated Co-opBank’s e-banking system; Promulgating the quotation of payment service for PCFs participated Co-opBank’s e-banking system; Guideline documents to install program software system and other technical assistance documents.

– To invest in infrastructure, technical service management and operations of new products such as centralized data center, computing equipment (server, storage devices, internet network…), security management system, issue e-signature and i-key, computer software system of e-banking transaction management for PCFs.

– To prepare human resources and personnel to meet the requirements to manage and operate new professionals for PCFs safely and effectively. At the headquarter, Co-opBank has recruited and arranged departments in charge (Payment department, IT Center, Accounting and Finance department…) to supervise, monitor and support PCFs’ operation and exploitation of new products. At the branches, Co-opBank has trained and arranged controlling officers, transaction executives to carry out payment service, e-banking transaction with PCFs to ensure all incoming/out-coming transactions to be controlled, handled quickly and timely.

– In order to satisfy remittance demand of PCFs, Co-opBank has always prepared available funds to pay immediately PCFs’ incoming/out-coming transaction orders. Although this is a relative big amount of fund and not profitable, with the role of the Bank of PCFs, Co-opBank has tried to arrange and accept low costs for the long-term benefits for PCF system and ensure all transactions to be fast, smooth and safe all time.

– To establish training system on site and remotely, which allows PCFs can participate concentrated training programs, practice online through computer system and training courses for more than 300 PCFs with over 1,000 participants who are Director/Deputy Director, Chief Accountant, Transaction Accountant of PCFs (at the end of the course, participants was qualified and certified). By 30 September 2014, Co-opBank considered and accepted admission for 254 eligible PCFs to join the payment system, grading the total transaction posts of PCFs and Co-opBank up to 300 posts.

After nearly three year of deployment, the program has achieved very positive results with PCFs’ turnover of out coming remittance amount in 2013 reached 1,787 billions with 27,517 items (up 156% of out coming amount and up 174% of the out coming items compared with 2012); The PCFs’ turnover of incoming remittance amount in 2013 reached 753 billions with 5,085 item (up 160% of the incoming amount and up 154% of the incoming items compared with 2012).

In the first December of 2014, the PCFs’ turnover of out coming remittance reached 3,186 billions with 51,092 items (up 181% of the out coming remittance amount and up 214% of the out coming items compared with 2013); The PCF’s turnover of incoming remittance amount reached 534 billions with 8,009 items (up 11% of the incoming remittance amount and up 153% of the incoming items compared with 2013).

More than 80% of PCF’s remittance orders are the orders out of the system, mainly low-valued orders (under 500 million VND) to serve the development demands of producing, trading, improving the members’ life standards in the rural areas.

By deploying the modern service products, it was safe and saves cost, it was the first time PCF members in the rural areas and remote area approached modern banking services without applying other commercial banks’ services; Thereby, it contributed to enhance PCFs’ reputation and position in their provinces, strengthen the system linkage and exploit the network widely and close to the people in the rural areas of PCF. In order to exploit the numerous benefits that the project has brought to the system, in the coming time Co-opBank will continue to do the research to expand the e-banking system to other PCFs all over the country.

Currently, the demand to join PCF is very much. It is expected that till 2016 Co-opBank will deploy products and accept the entire PCFs of the system to join this Project. Thus, total transaction posts of Co-opBank and PCFs have reached 1,300 spreading across all provinces and cities nationwide. It would be said that this is a very big trading network, only second to the Bank for Agriculture and Rural Development and covering communes, wards where PCFs locate. In order to achieve this objective, Co-opBank need to keep improving financial capability, investing in IT system and preparing human resources. On the other hands, it also need the attention from the State Bank branches in provinces and cities for the urgent permission to PCFs participating this service product implementation; thereby it facilitates PCFs to continue to apply robustly this product, modern banking service serving members in the rural areas; contributing to develop the credit institution system of cooperatives (including Co-opBank and PCFs) in Vietnam to more and more stably, safely and sustainably./.

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