A 30 trillion VND (nearly 1.5 billion USD) package to shore up the realestate sector was announced in mid-May this year. Some 70 percent of thepackage will be provided as loans to low-income earners who want topurchase houses at low interest rates of about 6 percent per year.
As appealing as these loans should be for people with low incomes, thedisbursement of these loans is taking place slowly: indeed, for thefirst 6 months, slightly more than 1 percent of the loans had beengranted to borrowers.
Viet Nam News spoke to DangHung Vo, Dr., Prof. at Hanoi National University, former Deputy Ministerof Natural Resources and Environment; Tran Nhu Trung, Deputy Directorof Savills Hanoi; and Doan Phuc, Deputy Director of Agribank Da Nang,about the loan program.
* The 30 trillion VND(nearly 1.5 billion USD) package was announced in mid-May, with manylow-income earners hoping to receive loans to purchase apartments fromsocial housing projects. Yet, slightly more than 1 percent of thepackage has been distributed in the last six months. Why is this so?
- Dang Hung Vo: The Government's support isallocating budget to commercial banks to lend money to low-incomeearners. I think the main impediment is that the lending mechanism isusing procedures that should be applied to high-income earners. Theserules require borrowers to show certifications of collateral assets andthe ability to pay their debts. Low-income earners, however, can onlyprove that they hope to have assets in the future after they purchase ahome through a contract with the housing projects investors – but it'svery difficult for them to prove their ability to pay debts: if they canprove this, they would not be poor any more!
Inother countries, they use another mechanism: the community guaranteemechanism. The community of low-income earners, together with socialorganisations, will manage and act as guarantors for low-income earnerswhen they need to borrow loans.
Also, borrowers willhave to provide proof of income. In Vietnam we're still using cash asthe main payment method, thus we can't provide proof of people'sincomes.
Moreover, borrowers will also have toprovide proof of their housing condition – to be more particular, acertificate that they don't currently own housing area smaller than 8sq.m per capita. This is complicated, as well, because the currenthousing ownership management system does not allow us to do this. Localauthorities will surely hesitate to provide such certifications becausethey don't have any way to verify if someone has already owned housingproperty in an area out of their management authority.
In general, we don't have enough tools to determine who would be theright beneficiaries of this package, while those who are really in needof such support have many difficulties in providing required documents.
- Tran Nhu Trung: I, myself, highly applaud theidea of the stimulus package: instead of protecting those withoutdifficulties, the package aims at supporting those in need, those whoare more vulnerable than others.
But the twist in thetale here is the conflict between the idea and the implementation of thepackage. The Government wants to do a good thing for a good cause andnot for profits: helping low-income earners. Yet, in the executionprocess it asks banks, who operate for profit, to provide the loans.With such conflicts existing, I don't think the initial idea can berealised.
Such conflicts resulted in an obviousconsequence: complicated procedures for borrowers, a thousand questions,of which none is easy to answer. Who can determine the term "lowincome"? Who can determine if someone owns or does not own an estateproperty?
* In recognition of such impediments, theGovernment has recently issued a new circular to ease some of theprocedures for borrowers, such as they only need to provide proof ofincome in case banks require this, or that local authorities have tocertify if some one does not own housing property in the area theymanage. Do you think such releases will speed the disbursement of theloans?
- Dang Hung Vo: I don't think so. Suchreleases in the requirements would otherwise result in things we don'twant. We might not be able to provide loans to those who do have lowincomes, or those who are really vulnerable and need the Government'ssupport. Even those who are not low-income earners would be able toborrow from the package.
The new regulations havenot been able to tackle the main problem: lending money to low-incomeearners must be different from lending to high-income earners. Therequirement on the ability to pay debts is still the toughest part forborrowers. Borrowers still have to provide proofs of income if banksrequire this - while I'm sure banks will still require such proof inorder to protect themselves from bad debts. I think we have to changethe lending mechanism of banks involved in the disbursement of thestimulus package.
- Tran Nhu Trung: Even with therecent instruction, which is deemed more open, I don't think it is anyeasier for low-income earners to borrow loans from this package, becauseit has not addressed the main problem: the conflict between non-profitand profit.
It's time to face it: there are manythings that the Government needs to do for the cause of social welfare.But the Government can't do everything and it can't do everything forfree. And it's not a good choice for Vietnam's economy at the currenttime. Once the economy has developed to a certain level, we just can'tdrive it the way we want, we have to respect its own operation,especially free market operations.
* So what do youthink can be done for this package to fulfill its mission in not onlyshoring up the real estate sector, but also providing necessary supportto low-income earners?
- Dang Hung Vo: We can set a longer period of time for the disbursement of the package, maybe to 20 years.
Also, a change in the requirement of proving the ability to pay debtsis needed. The reality is that many countries prove that lending moneyto low-income earners is a difficult task, but there are many successfulmodels. A bank in Bangladesh has been very successful in lending moneyto poor people: borrowers don't need to provide proof of collateralassets.
For long-term solution, we should give goodopportunities and needed rights to the poor so that they area able toescape poverty themselves.
- Tran Nhu Trung: Ithink we need to rewrite the axiom: We do have social welfare policies,but we must accept the rules of a market economy. The goal is to supportthe vulnerable group, but using tools of the market, not the tools ofpolitics.
My idea is that we can support borrowersbased upon the value of the housing properties. For instance, if youwant to buy an apartment costing 400 million VND (19,000 USD), you canborrow at the interest rate of 0 to 3 percent per month, while if youwant to borrow 500 million VND (23,000 USD), the interest rate would be 4percent. The more you want to borrow, the higher interest rate you willhave to accept. This ladder takes into account market elements.
This method will be comprehensive: we respect the rule of the marketeconomy, while we can still classify borrowers based on the amount oftheir loans.
The issue of social housing, or housing forlow-income earners, is a difficult question for many countries. However,in many developed countries, they have a different approach. They knowwhat they can do and what they can't. For low-income earners, they don'tthink of housing property ownership, they think of renting, as well asrenting with government subsidies.
- Doan Phuc:Two branches of Agribank in Da Nang city have provided loans to 61individuals. Most of these are governmental and military staff - whohave stable incomes and can prove that.
We have beenable to provide loans to more customers in comparison to other banks,thanks to the goodwill of Da Nang city authorities. The People'sCommittee has been very enthusiastic and determined in bringing theseloans to people who need them. The committee has requested authoritiesat the grassroots level provide necessary certifications in order tofacilitate the borrowing process.
For instance, thecity authority requests that grassroots authorities certify if someonedoes not have housing assets in the area that they manage, without theneed to know if they have housing assets in other areas. The city alsorequests that low income certifications be granted to those earning lessthan 9 million VND (428 USD) per month.
Though suchcertifications might not be legally accepted by many banks, we havebeen more flexible because we can't wait until the Government issues alegal framework to lend money to people who need it right now.
For a long-term perspective, I think we will need a legal lobby forthe term "future established housing property". Because, currently,borrowers can only take the future housing property that they buy ascollateral assets when required by banks, but many notary offices don'tprovide services for such terms.
- Tran Ha (inHanoi): I first worked with a branch of Vietinbank. Initial procedureswere fine, but when it came to the 3-party contract among the bank, theinvestor of my future housing property and me, the bank did not acceptthe contract form provided by my investor.
Iswitched to another bank - the Bank for Investment and Development ofVietnam (BIDV). Here, the bank didn't accept the certification of myhousing condition, which said I was staying in my parents' house.
I reached out for another branch of Vietinbank - and finally this timethey accepted both the 3-party contract and the housing conditioncertification that my local authority gave me.
But Iwas wondering why banks are so different in interpreting theGovernment's instruction? Even branches of a bank are different fromeach other - like the two branches of Vietinbank that I worked with, asone accepted the 3-party contract and one did not.
Moreover, the local authority at my residency area said they knewnothing about the Government's instruction on providing suchcertificates for people.
I happen to know manypeople, from a friend working at a bank, to people working for the localPeople's Committee where I am living. That helped me a lot incompleting the necessary procedures and finally being able to borrow anamount of money from a bank. But what about low-income earners who knownobody?.-VNA
As appealing as these loans should be for people with low incomes, thedisbursement of these loans is taking place slowly: indeed, for thefirst 6 months, slightly more than 1 percent of the loans had beengranted to borrowers.
Viet Nam News spoke to DangHung Vo, Dr., Prof. at Hanoi National University, former Deputy Ministerof Natural Resources and Environment; Tran Nhu Trung, Deputy Directorof Savills Hanoi; and Doan Phuc, Deputy Director of Agribank Da Nang,about the loan program.
* The 30 trillion VND(nearly 1.5 billion USD) package was announced in mid-May, with manylow-income earners hoping to receive loans to purchase apartments fromsocial housing projects. Yet, slightly more than 1 percent of thepackage has been distributed in the last six months. Why is this so?
- Dang Hung Vo: The Government's support isallocating budget to commercial banks to lend money to low-incomeearners. I think the main impediment is that the lending mechanism isusing procedures that should be applied to high-income earners. Theserules require borrowers to show certifications of collateral assets andthe ability to pay their debts. Low-income earners, however, can onlyprove that they hope to have assets in the future after they purchase ahome through a contract with the housing projects investors – but it'svery difficult for them to prove their ability to pay debts: if they canprove this, they would not be poor any more!
Inother countries, they use another mechanism: the community guaranteemechanism. The community of low-income earners, together with socialorganisations, will manage and act as guarantors for low-income earnerswhen they need to borrow loans.
Also, borrowers willhave to provide proof of income. In Vietnam we're still using cash asthe main payment method, thus we can't provide proof of people'sincomes.
Moreover, borrowers will also have toprovide proof of their housing condition – to be more particular, acertificate that they don't currently own housing area smaller than 8sq.m per capita. This is complicated, as well, because the currenthousing ownership management system does not allow us to do this. Localauthorities will surely hesitate to provide such certifications becausethey don't have any way to verify if someone has already owned housingproperty in an area out of their management authority.
In general, we don't have enough tools to determine who would be theright beneficiaries of this package, while those who are really in needof such support have many difficulties in providing required documents.
- Tran Nhu Trung: I, myself, highly applaud theidea of the stimulus package: instead of protecting those withoutdifficulties, the package aims at supporting those in need, those whoare more vulnerable than others.
But the twist in thetale here is the conflict between the idea and the implementation of thepackage. The Government wants to do a good thing for a good cause andnot for profits: helping low-income earners. Yet, in the executionprocess it asks banks, who operate for profit, to provide the loans.With such conflicts existing, I don't think the initial idea can berealised.
Such conflicts resulted in an obviousconsequence: complicated procedures for borrowers, a thousand questions,of which none is easy to answer. Who can determine the term "lowincome"? Who can determine if someone owns or does not own an estateproperty?
* In recognition of such impediments, theGovernment has recently issued a new circular to ease some of theprocedures for borrowers, such as they only need to provide proof ofincome in case banks require this, or that local authorities have tocertify if some one does not own housing property in the area theymanage. Do you think such releases will speed the disbursement of theloans?
- Dang Hung Vo: I don't think so. Suchreleases in the requirements would otherwise result in things we don'twant. We might not be able to provide loans to those who do have lowincomes, or those who are really vulnerable and need the Government'ssupport. Even those who are not low-income earners would be able toborrow from the package.
The new regulations havenot been able to tackle the main problem: lending money to low-incomeearners must be different from lending to high-income earners. Therequirement on the ability to pay debts is still the toughest part forborrowers. Borrowers still have to provide proofs of income if banksrequire this - while I'm sure banks will still require such proof inorder to protect themselves from bad debts. I think we have to changethe lending mechanism of banks involved in the disbursement of thestimulus package.
- Tran Nhu Trung: Even with therecent instruction, which is deemed more open, I don't think it is anyeasier for low-income earners to borrow loans from this package, becauseit has not addressed the main problem: the conflict between non-profitand profit.
It's time to face it: there are manythings that the Government needs to do for the cause of social welfare.But the Government can't do everything and it can't do everything forfree. And it's not a good choice for Vietnam's economy at the currenttime. Once the economy has developed to a certain level, we just can'tdrive it the way we want, we have to respect its own operation,especially free market operations.
* So what do youthink can be done for this package to fulfill its mission in not onlyshoring up the real estate sector, but also providing necessary supportto low-income earners?
- Dang Hung Vo: We can set a longer period of time for the disbursement of the package, maybe to 20 years.
Also, a change in the requirement of proving the ability to pay debtsis needed. The reality is that many countries prove that lending moneyto low-income earners is a difficult task, but there are many successfulmodels. A bank in Bangladesh has been very successful in lending moneyto poor people: borrowers don't need to provide proof of collateralassets.
For long-term solution, we should give goodopportunities and needed rights to the poor so that they area able toescape poverty themselves.
- Tran Nhu Trung: Ithink we need to rewrite the axiom: We do have social welfare policies,but we must accept the rules of a market economy. The goal is to supportthe vulnerable group, but using tools of the market, not the tools ofpolitics.
My idea is that we can support borrowersbased upon the value of the housing properties. For instance, if youwant to buy an apartment costing 400 million VND (19,000 USD), you canborrow at the interest rate of 0 to 3 percent per month, while if youwant to borrow 500 million VND (23,000 USD), the interest rate would be 4percent. The more you want to borrow, the higher interest rate you willhave to accept. This ladder takes into account market elements.
This method will be comprehensive: we respect the rule of the marketeconomy, while we can still classify borrowers based on the amount oftheir loans.
The issue of social housing, or housing forlow-income earners, is a difficult question for many countries. However,in many developed countries, they have a different approach. They knowwhat they can do and what they can't. For low-income earners, they don'tthink of housing property ownership, they think of renting, as well asrenting with government subsidies.
- Doan Phuc:Two branches of Agribank in Da Nang city have provided loans to 61individuals. Most of these are governmental and military staff - whohave stable incomes and can prove that.
We have beenable to provide loans to more customers in comparison to other banks,thanks to the goodwill of Da Nang city authorities. The People'sCommittee has been very enthusiastic and determined in bringing theseloans to people who need them. The committee has requested authoritiesat the grassroots level provide necessary certifications in order tofacilitate the borrowing process.
For instance, thecity authority requests that grassroots authorities certify if someonedoes not have housing assets in the area that they manage, without theneed to know if they have housing assets in other areas. The city alsorequests that low income certifications be granted to those earning lessthan 9 million VND (428 USD) per month.
Though suchcertifications might not be legally accepted by many banks, we havebeen more flexible because we can't wait until the Government issues alegal framework to lend money to people who need it right now.
For a long-term perspective, I think we will need a legal lobby forthe term "future established housing property". Because, currently,borrowers can only take the future housing property that they buy ascollateral assets when required by banks, but many notary offices don'tprovide services for such terms.
- Tran Ha (inHanoi): I first worked with a branch of Vietinbank. Initial procedureswere fine, but when it came to the 3-party contract among the bank, theinvestor of my future housing property and me, the bank did not acceptthe contract form provided by my investor.
Iswitched to another bank - the Bank for Investment and Development ofVietnam (BIDV). Here, the bank didn't accept the certification of myhousing condition, which said I was staying in my parents' house.
I reached out for another branch of Vietinbank - and finally this timethey accepted both the 3-party contract and the housing conditioncertification that my local authority gave me.
But Iwas wondering why banks are so different in interpreting theGovernment's instruction? Even branches of a bank are different fromeach other - like the two branches of Vietinbank that I worked with, asone accepted the 3-party contract and one did not.
Moreover, the local authority at my residency area said they knewnothing about the Government's instruction on providing suchcertificates for people.
I happen to know manypeople, from a friend working at a bank, to people working for the localPeople's Committee where I am living. That helped me a lot incompleting the necessary procedures and finally being able to borrow anamount of money from a bank. But what about low-income earners who knownobody?.-VNA
