Bank on Wheels
| Author | G. Nguyen Tien Hung |
| Position | Professor of Economics at Howard University and a former IMF economist and consultant |
| Pages | 41-43 |
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A recent experiment has brought banking services to Vietnam's poorest
Page 41
Ma Seo Sang, a Hmong widow living on less than 25 cents a day in the mountainous region of Vietnam, needed help. She had sold her pig to pay for her husband's funeral, paid a fine incurred by her son by selling one of her buffalo, and redeemed a debt with the other. She had borrowed all she could from relatives. Moneylenders, if they would even lend to her, would charge exorbitant interest (up to 10 percent a month). She needed money to survive.
Sang's plight raises many issues related to extreme poverty, of which lack of access to credit is one. Part of the solution is microfinance-the provision of basic financial services to the poor. Microfinance can offer a path out of poverty. But how long is the path, and can it be shortened? Vietnam's experiment with the Mobile Banking Program under the World Bank's Rural Finance Project provides a partial answer to those questions. It suggests that creative ways can be found not only for lenders to reach out to the poor but also for the poor to "reach in" to lenders.
According to a 1999 World Bank survey, the proportion of people living below the poverty line ($128 per capita a year in 1998) in Vietnam dropped markedly in the 1990s, but extreme poverty still affects pockets of the population. Under various programs, significant credit was earmarked for rural development. The Vietnam Bank for Agriculture and Rural
Development (Agribank), with one of the most extensive branch networks in the world, was the main conduit for this flow. However, lack of access roads and high transaction costs prevented it from serving the poorest.
In 1998, Agribank initiated a mobile banking program modeled after similar programs in Bangladesh and Malaysia. It procured 159 vehicles equipped to travel on dirt roads and hilly pathways, enabling loan officers to reach remote areas to process loan applications, disburse money, collect repayments, and mobilize savings deposits. The visits followed a fixed calendar and were announced in advance. Scheduled to coincide with weekly village markets, they saved borrowers traveling time and transportation costs. This summer, another 172 vehicles will enter service.
Once the program was launched, it became clear that more than just difficult access prevented the poorest from taking advantage of its services. Their isolation caused them to have feelings of helplessness and fear. In the upland ethnic group, the higher up a mountain people lived and the longer their isolation, the more they seemed to believe that they could not get credit. Suspicion was another issue. What if the lender offered a loan and then, if a payment were late, took a farmer's buffalo, as had happened to Sang?
Above all, the poorest people lacked confidence and self-esteem. For example, the illiterate poor would wonder how they could fill out applications and receipts. Others felt they could do nothing to earn extra income to repay a loan. Many were afraid to venture into activities other than cultivation and animal husbandry, even though opportunities existed. In Lao Cai Province, for example, an increase in tourism had created a market for ethnic cloth.
Page 42
But for mobile banking to work for borrowers, the following services had to be made available.
Offering appropriate loan products. To meet the needs of the poor to...
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