Promoting financial inclusion

Friday, 2019-04-05 13:41:13
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The State Bank of Vietnam has recently advocated the expansion of banking credit sources for consumer loans with reasonable interest rates and duration. (Illustrative image)
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NDO –Financial inclusion is the increase in the supply of financial services including credit, savings, payment services and insurance from formal financial providers to all individuals and organisations, particularly for low-income and vulnerable people of working age, according to the United Nations. Financial inclusion is considered an important pillar to contribute to mobilising and effectively using social resources while narrowing and repelling black credit. It is also expected to promote the rotation of savings and investment capital and create job opportunities, thereby, fuelling economic growth, sustainable poverty reduction, social welfare and order, and improving the living standards of the people.

55 countries have made commitments and more than 30 countries have issued or are building national strategies on inclusive finance with the aim of ensuring all households can access appropriate and responsibly provided financial services of savings, deposit, payment, money transfer, credit and insurance at reasonable costs.

The World Bank has set out the Universal Financial Access by 2020 with the focus on 25 prioritised countries, including Vietnam, in a bid to enhance opportunities to access formal financial services for individuals. Financial inclusion is also one of the three pillars of the ASEAN Vision 2025 on financial integration and the Working Group on inclusive finance, aiming to promote this area among ASEAN countries.

The State Bank of Vietnam has recently advocated the expansion of banking credit sources for consumer loans with reasonable interest rates and duration. Accordingly, the Vietnam Bank for Agriculture and Rural Development (Agribank) will offer VND 5 trillion for consumer loans and the Vietnam Bank for Social Policies has increased the maximum level of unsecured loans for poor households from VND 50 million to VND 100 million per household and raised the maximum loan term to 120 months since March 1, 2019. This policy has been appreciated by the people as it helps the poor to have more opportunity to access formal credit from the banking system, meeting demand for consumption and production development while boosting poverty reduction and social inequality.

The policy of expanding loans for needy households is not only suitable to the content and requirements of financial inclusion, but also directly and indirectly contributes to repelling black credit activities nationwide, which are potentially threatening social order and causing annoyance among the people. Under the direction of the Government, the State Bank is developing a national strategy framework on financial inclusion to submitto the Prime Minister for approval in 2020, with an objective of making citizens and businesses (especially people in rural and remote areas and small and medium-sized enterprises) to have easier access to and efficiently use formal financial services at reasonable cost. At the same time, the scheme aims to develop formal credit institutions with safe and effective operations to protect consumers.

In order to develop financial inclusion, it is necessary to strengthen communication about financial inclusion while boosting diversified financial products and online banking services, particularly in terms of credit, savings, payment services, investment and insurance. It also requires the enhancement of digital application capacity, electronic infrastructure, national data centres and data security policies, in addition to expanding non-cash payments and improving ecosystems in support of Fintech enterprises.

It is also advisable to promote international cooperation, particularly in the framework of APEC, ASEAN, World Bank, ADB and UN, to mobilise and utilise resources for microfinance development and to upgrade banking technology infrastructure compatible with digital finance platform.

In addition to the expansion of State capital, financial inclusion also requires contributions from social resources. Therefore, it is necessary to prevent new frauds and crimes arising in the process of developing inclusive finance. For example, it is important to warn and prevent the abuse of peer-to-peer (P2P) lending to be transformed into a new multi-channel capital raising method with high interest rates and risky for both investor and borrowers.

Developing safe financial inclusion and repelling black credit will make effective contributions to the growth of a synchronous and healthy financial market while promoting investment and supporting social security, creating favourable conditions for the country's rapid, inclusive and sustainable economic development in the context of the industrial revolution 4.0.