Microcredit: A Bridge for the Poor

Ms. Nguyen Thi Hoang lives in Ho Chi Minh City in Vietnam. She looks after her elderly parents and three mentally ill brothers. Each day her mother sits in the corner of their slum house peeling cashews to earn money for the family. She makes VN$4,000 ($0.34) for every kilogram of cashews that she peels.

Woamn and two boys sitting on bed peeling cashews Her mother's cashew peeling is the family's main source of income.

That was until Hoang applied for a VN$2 million ($170.00) loan made available through an Australian government microfinance project.

Hoang's brothers and mother peeling cashews

Hoang used her loan to buy a sewing machine and now she earns up to VN$30,000 (about $2.50) a day making clothes. She has become the family's breadwinner.

Hoang is a member of the Capital Aid Fund for Employment of the Poor (CEP), a non-profit social organisation set up in 1991 by the Ho Chi Minh Labour Confederation.

The Fund provides financial services to poor households in Ho Chi Minh City. With Australian assistance the Fund has provided nearly 40,000 loans.

Most poor people get loans to generate jobs for themselves. Many of them get loans to breed chickens and ducks, process garment products, or develop small businesses. As a result, thousands of jobs have been created for the poor.

Ms. Nguyen Thi Hoang Van, the CEP Director, said the Australian project would help CEP to increase its financial services from 23,500 clients in 2001 to 39,000 in 2006. It wouls also help to develop a demonstration model for a financially sustainable Vietnamese microfinance institution that reaches and benefits the poor.

Increasing access for the poor to credit and savings services is a well documented method for reducing poverty, by increasing employment, household production and small enterprise development.

2004