CEP Fund,
Demonstrating Sustainable Microfinance

A Long Term Commitment

The decision by the Vietnamese government did not come overnight. Led by Madame Nguyen Thi Hoang Van (Director of CEP Fund), Mr. Dang Ngoc Tung (a Member of the National Assembly of Viet Nam, Chairman of the HCMC Labour Confederation and Chairman of CEP Fund), and with the strong commitment of the State Bank and the HCMC People's Committee, CEP has worked extensively over the last three years to raise awareness and prove to the government the potential of sustainable microfinance. Numerous presentations were made to government bodies, including detailed discussions outlining the logic and method CEP uses in calculating its sustainable interest rate.

In an exciting development for MFls seeking to provide sustainable services to the poor in Vietnam, in May 2001, Capital Aid for Employment to the Poor (CEP Fund) in Ho Chi Minh City received Prime Ministerial approval as a government demonstration project in sustainable microfinance. This new status allows CEP Fund to legally set its own interest rate and officially exempts the organization from income and value-added taxes. While no other non-government, domestic MFls are currently under consideration for this status, it does represent the first, and perhaps the most important step, towards acceptance of sustainable microfinance by the Vietnamese government.

In fact, before the proposition was put to the Prime Minister, CEP Fund was required to receive approval from the State Bank, the Ministry of Finance, the General Labour Confederation, the Ministry of Planning and Investment, as well as the Ministry of Foreign Affairs. This process took several years.

But the most important factor was when the Australian Agency for International Development's (AusAID) partnered with CEP Fund, providing an A$5 million grant for expansion and capacity building in the middle of 2001. The demonstration project status was finally approved as part of the co-operative agreement on microfinance between the governments of Vietnam and Australia. Targets were set based on three primary objectives: institutional capacity building, client expansion and demonstration. Specific targets includes achievement of full financial self-sufficiency and growth of CEP Fund's capital base by 20% per annum. CEP Fund is required to provide quarterly and annual reports, an annual plan, impact assessment reports, and a project completion report to the Government of Vietnam.

The Implications of Success

The success of the CEP Fund experiment will have a powerful demonstration effect. First, by showing that the provision of microfinance in a sustainable manner can reduce and eliminate the poverty of its clients. And second, as a pilot project, CEP Fund's success will be carefully measured by the Government of Vietnam and included in a study, currently under development by the State Bank of Vietnam, recommending new policies related to the legal and operating environment for MFls ( e.g. interest rate policy). A decision is expected by 2003.

With labour confederations in other provinces exhibiting strong interest in replicating the CEP approach, the first scheduled to launch in Ba Ria - Vung Tau province in 2002, as well as other MFls seeking to expand throughout the country, this news couldn't come at a better time.

By Jennifer Meehan, Credit for the Poor, Vol 33, January 2002
 Editor : Muhammad
Executive Editor : Khalid Shams 
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