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Interview with the general director: Building a sustainable PCF system

The Annual Member General Meeting 2013 which was held on March 25th 2014 in Hanoi- was an important meeting where members discussed and made decisions on a number of issues which should allow the PCF system to develop more rapidly and more sustainably in the new age. Mr. Do Manh Hung- The General Director of Co-opBank has commented on this issue.

Sir, this is the first Annual Member General Meeting since CCF was transformed into Co-opBank, could you give us some ideas on how PCFs feel about Co-opBank in its new role?

Mr. Do Manh Hung: In this General Meeting, members basically agreed that the introduction of Circular No. 31/2012/TT-NHNN was absolutely necessary and thereby confirmed a clearer focal role of Co-opBank. This also serves as a legal basis for PCFs to operate safely and sustainably.


Mr. Do Manh Hung- General Director of Co-opBank

Looking back at 2013, I can say that Co-op Bank has made incredible efforts and strictly complied with the goals and directions set by the Governor of the State Bank of Vietnam (SBV) and fulfilled the process of transformation from CCF into Co-opBank. It has also pursued relevant support and investment policies, diversified a modern bank’s multi- functional products and services, fulfilled the role of the system’s apex and made important contribution to the development of the system.

In particular, Co-opBank made loans and advised PCFs which encountered liquidity shortages. Co-opBank coordinated with local SBV branches and authorities to seek measures that could help PCFs to overcome difficulties, therefore helping to keep the safety of the entire system.

Co-opBank has played an increasingly important role in restructuring the whole system by taking part in organizing the General Meeting on Reviewing 12- year implementation of Directive 57/CT-TW; completing the restructuring plan for Co-opBank and PCFs from 2013-2015 with vision to 2020; preparing legal documents for restructuring: Circular 31/2012/TT-NHNN which are regulations on Co-op Bank, Circular on PCFs, Circular on the Safety Fund, Regulations on fund channeling from Co-opBank to PCFs, Regulations on reporting for Co-opBank and PCFs as well as regulations on job procedures and etc. These documents were submitted to the General Meeting for approval before being implemented in the whole system.

The road ahead is still long with many awaiting difficulties. In this General Meeting, on which particular issue were most members concerned about?

Mr. Do Manh Hung: In this General Meeting, members acted straightforward and responsibly regarding the developments of themselves and of the system. It was recognized by all members that the most substantial weakness of the system during its establishment and development is that system alignment has not been fully promoted. Despite being a cooperative model, PCFs have not been closely linked together. Rather they are self- concerned and have not been responsible towards the safety of the system as a whole. Therefore, as a consequence, a systemic strength has not been formed for when an incident occurs. In addition, some PCFs lack of stability in operation, some are profit- orientated and have not fully taken into account members’ interests.

Having recognized the weaknesses above, it was agreed by all members that a Safety Fund should be established soon in accordance with Circular No.03/2014/TT-NHNN. This will serve as a string attachment to PCFs and enhance the alignment of the system in general.

Moreover, in the coming time, SBV will soon promulgate a Circular on the restructuring of PCFs, setting them back to the cooperative principles to provide better support to their members. This is a necessary step to ensure the safety, soundness and stability of all PCFs.

PCFs also highly agreed with the drafted regulations on the use and management of the Safety Fund in accordance with Circular No.03/2014/TT-NHNN dated 23rd January 2014 and based on experiences learnt after the pilot phase of the Safety Fund. New regulations will create a transparent and consistent mechanism for the management and operation of the fund.

Besides, all PCFs agreed on the minimum deposit rate in the drafted Regulations on fund channel from Co-opBank to PCFs. They also agreed that 3% of the average deposit rate of the previous quarter is flexible enough and able to reflect increasing alignment of the system and the capacity of PCFs.

PCFs also unanimously approved the 2014 annual capital contribution of the members to Co-op Bank which is 1,000,000 VND to contribute to capacity building of the bank, positively supporting the system and capturing the spirit of developing internal resources of the system

So, what will Co-opBank do to fulfill the role of “the bank of all PCFs”?

Mr. Do Manh Hung: In this General Meeting, Mr- Dang Thanh Binh- the Deputy Governor of the SBV once again highlighted Co-opBank’s role and responsibilities towards the system development as well as its duties for 2014 and coming years. The aim for this restructuring phase has been set clearly- which is not only a safe system but also increasing in scale and coverage. The PCF system must become a reliable and trust worthy lender for millions of farmer households, creating an important foundation to end usury, ensuring social security and sustainable poverty reduction in rural areas.

On this basis, in the coming time, Co-opBank will focus on implementing the role of all PCFs’ bank, contributing to safe operations of the system. In particular, right after the General Meeting, a meeting among Co-opBank’s Board of Directors was held to accelerate the implementation of the objectives approved by the General Meeting.

Soon, Co-opBank will send groups of delegates to different regions to implement the General Assembly Resolution for 2013 focusing on five common legal documents which are: Regulations on capital intermediation from Co-opBank to PCFs, Regulations on management and use of the Safety Fund and Guidelines on reporting from PCFs to Co-opBank. .

Co-opBank will continue to establish and apply modern banking products as well as proposals on appropriate mode of operation which are appropriate for PCF’s nature and characteristics. It will also implement CF-ebank project between Co-opBank and PCFs to provide modern banking services for members in rural areas. In 2014, after the pilot phase, Co-opBank will implement member’s card which also is a domestic credit card in the entire system. In addition, money transfer services and other services requested by PCFs will also be further expanded.

The new authorities given to Co-opBank will contribute to build a strong and sound system from strengthening supervisory capability to supporting PCFs in building a quality workforce for the system.

Especially, when the plan for restructuring the PCF system is approved, Co-opBank will commence to conduct supporting measures uniformly and timely so that qualified PCFs can start the restructuring process effectively. However, this is a two- way condition, which requires the consent of PCFs in beneficiary liability policy as well as policy implementation. The growth of the system depends on the strength of each PCF. That also means efforts need to come not only from Co-opBank but above all from the PCFs themselves.

Thank you very much!