Tuesday, April 24, 2012

Passport Series: As Viet Nam develops, microfinance fills in the gaps

Viet Nam is best represented by its contrasting environment, the mountainous north and the southern coastal lowlands; the months of torrential rain and the hot sunny season; the rural agrarian economy and the frenzied industrial cities. But Viet Nam, roughly the size of New Mexico, is united by its optimism.

The s-shaped country borders China, Laos and Cambodia, and its expansive coastline spans the Gulf of Thailand, Gulf of Tonkin and the South China Sea. Home to 91 million people, Viet Nam has been defined by war, colonialism and collectivist economics. But, in 1986, the government introduced free market reforms aimed at encouraging private ownership, turning Viet Nam into one of world’s fastest growing economies.

Amid the growth, the government was able to dramatically reduce extreme poverty by establishing equitable economic policies -- such as egalitarian land distribution, subsidized healthcare and education programs -- but the global recession has put this progress in jeopardy. With 14 million people living below the poverty line, there is an immense and urgent need for targeted anti-poverty efforts to continue.

Kiva, wanting to support development and progress, has worked in Viet Nam for over four years. By selecting partners that target the most vulnerable communities, we hope to play a role in securing a bright economic future for the Vietnamese.

Viet Nam struggled to find its economic footing in the aftermath of the Viet Nam War, which had destroyed much of its rice-based agriculture. For ten years, the government tried to revitalize the system with a planned economy, but its restrictions on economic activity -- compounded by post-war trade embargoes -- resulted in little growth.

When the Soviet Bloc countries -- Viet Nam’s primary trade partners -- began to erode, Vietnam was coaxed into adopting more of a free market approach. Five years later, the country saw steady 7-8% annual GDP growth.

While manufacturing and technology dominate the economy in Viet Nam’s major cities, Ho Chi Minh and Ha Noi, 48% of the labor force is employed in the agriulture sector. Significant crops include cashews, black pepper, coffee, and rice. Farming’s integral role in the larger economy makes it a particilarly powerful route for the rural poor to improve their lives. But this growth is limited by access to resources.

For rural populations, access to state credit, education, infrastucture and public services is limited. Laws preventing discrimination, unequal pay, and even child marriage are often unknown or ignored in the face of tradition and customary expectations of deference. The lack of education and information on financial options results in a de facto prohibition for women to qualify for commerical loans.

Microfinance institutions have stepped up to fill in the gaps by offering loans, savings, training programs and supporting families. This BBC segment highlights some of the ways microcredit is helping to improve the conditions in Viet Nam’s poorest communities.

In Viet Nam, we are particularly interested in encouraging an equal and vibrant economy by supporting rural economic activity. Working with successful partners who understand the needs of the community, we hope to play a role in alleviating poverty in Viet Nam.

This is the first of a three-part series taking a closer look at Viet Nam, its history with microfinance, Kiva's role in expanding opportunities for Vietnamese households, and what it's like to participate in the country's economy as a borrower, lender and field worker. We hope you enjoy.

photos courtesy of TontonJon, World Bank, CIAT and CIA World Factbook