Developing micro-finance institutions in Vietnam: implications for establishing an enabling regulatory environment

Based on results from a three-month field trip in the poorest regions of Vietnam, and on an extensive review of the literature, this thesis analyzes the current state of the micro-finance sector in Vietnam in terms of practices used by micro-finance institutions (MFIs) and in terms of the characteristics and needs of the regulatory environment they evolve in. The thesis identifies the conditions that constitute an "enabling environment" for sound MFIs on the basis of a review of international case studies and analysis. The literature review also leads to the development of a definition of poverty as "an exclusion from society and its productive systems, rooted in a lack of choices and opportunities", and human development as "the goal and process of enlarging people's choices". It explains how developing access to adequate microfinancial services can allow the poor to create micro-enterprises, accumulate saving, and increase their standards of living. A set of criteria for determining the soundness of micro-financial programs is developed, and the characteristics of a regulatory enabling environment that can facilitate the efficient operations of a wide network of local MFIs are pointed. It then presents a picture of current poverty eradication strategies and MFI practices in Vietnam, and of the regulatory environment MFIs evolve in. It then analyzes those findings in the light of the sound practices generated from the review of international experience. A set of implications is derived that reviews to which degree (i) Vietnam's national micro-finance strategy should be re-oriented to promote the creation or formalization of MFIs and allow them to operate on a market-pricing base; (ii) the Government should adapt the practices of its Bank for the Poor to fit international sound practices, and should use its wide outreach potential to disseminate such practices among local MFIs; (iii) a consultative process between all relevant actors should be undertaken to devise an appropriate set of regulations to govern formal MFIs and create a supervisory framework adapted to the characteristics of MFIs; and (iv) better use should be made of the existing micro-finance capacity by developing linkages between all players.Applied Science, Faculty ofCommunity and Regional Planning (SCARP), School ofGraduat