Understanding Vietnam's Decree 162 on Credit Fund Licensing: A Comprehensive Guide

Vietnam's financial sector has witnessed significant regulatory developments with the introduction of Decree 162/2024/ND-CP, which establishes guidelines for licensing people's credit funds and regulating foreign investment in this sector. This guide provides an in-depth analysis of the decree's key provisions and implications.

Background and Context

People's credit funds play a vital role in Vietnam's financial ecosystem, particularly in providing financial services to rural and underserved communities. These institutions operate as cooperative financial organizations, serving their members through various banking and credit services.

Role in Vietnam's Financial System

Credit funds serve as crucial intermediaries in Vietnam's financial landscape, bridging the gap between traditional banking services and local communities. They provide essential financial services including savings products, loans, and basic banking operations to their members.

Key Licensing Requirements

Basic Conditions for Establishment

Under Decree 162, applicants must meet several fundamental requirements to establish a people's credit fund: (Article 10 Decree 162/2024/ND-CP)

• Regarding capital: The minimum charter capital must be equal to the statutory capital required by the government when applying for the license.
• Regarding members: 
• There must be at least 30 members who meet the required conditions and have sufficient financial capacity to contribute capital for the establishment of the People's Credit Fund. 
• The founding members must be individuals, households, or legal entities (excluding social funds and charitable funds) that are operating normally and meet the conditions specified by the regulations.
• Regarding governance: 
• Managers, operators, and supervisory board members must meet the standards and conditions set by the regulations. 
• The organizational structure of the Board of Directors and the Supervisory Board must comply with the provisions of the Credit Institutions Law.
• A charter must comply with the provisions of the Credit Institutions Law and other relevant legal regulations. 
• There must be an establishment plan and a feasible business plan for the first 3 years of operation.

Foreign Investment Regulations

• People's credit funds are allowed to raise capital through borrowing from credit institutions and foreign bank branches (Article 24.4 Circular 29/2024/TT-NHNN).
• People's credit funds are entitled to receive funding from the State, domestic organizations, and individuals, as well as foreign entities (Article 29.4 Circular 29/2024/TT-NHNN).

Application Process  (Section 8, Part 2 of Decision 658/QĐ-NHNN)

The licensing process involves several key stages:

Required Documentation 

• The Charter of the People's Credit Fund 
• Minutes of the meeting of the founding congress of the People's Credit Fund.
• The resolution of the founding congress on the approval of the Charter, the election of the Chairman and other members of the Board of Directors, the Head of the Supervisory Board, and other members
• The decision of the Board of Directors of the People's Credit Fund on the appointment of the Director of the People's Credit Fund
• Documents proving the ownership or legal right to use the location of the head office.

For details on Required Documentation, refer to this Article: Complete Guide to Credit Fund Licensing Requirements in Vietnam 2024 

Submission and Review Procedures

Applications undergo a comprehensive review process:

1. The preparatory committee prepares the application for a license and submits it to the State Bank branch of the province or city.
2. The State Bank branch confirms receipt of the complete application or requests additional documents within 10 working days.
3. The State Bank branch sends a written request for feedback from the local People's Committee and the Vietnam Cooperative Bank regarding the proposed personnel and the establishment of the credit fund within 10 days.
4. The People's Committee and the Vietnam Cooperative Bank have 10 days to provide feedback. If no feedback is received, the State Bank branch considers that there are no objections.
5. The State Bank branch sends written approval for the principle of establishing the credit fund and the proposed personnel list within 30 days.
6. The preparatory committee organizes the founding congress of the credit fund and submits the licensing application within 90 days.

Issuance of License:

1. The State Bank branch confirms receipt of the complete application or requests additional documents within 5 working days.
2. The State Bank branch issues the license within 60 days if the application is complete, or provides a written explanation if the license is not granted.

For more details, please refer to the National Public Service Portal: The procedures for granting a license for the establishment and operation of a people's credit fund. 

Compliance and Monitoring

Licensed credit funds must maintain ongoing compliance with various regulatory requirements:

Ongoing Requirements

• Regular Reporting Obligations: Credit funds must provide regular and accurate reports to regulators, ensuring transparency and allowing for monitoring of financial health and compliance.
• Maintenance of Capital Adequacy: Funds must maintain sufficient capital buffers to absorb potential losses, ensuring financial stability and the ability to meet obligations.
• Risk Management Standards: Credit funds must implement robust risk management practices to identify and mitigate risks (e.g., credit, market, liquidity, operational) to ensure business continuity.
• Internal Control Systems: Funds need effective internal controls to prevent fraud, ensure operational efficiency, and guarantee compliance with both internal policies and external regulations.

Conclusion

Decree 162/2024/ND-CP represents a significant step in modernizing Vietnam's credit fund sector. It provides a clear framework for participants while ensuring proper oversight and stability in the financial system.

Key Takeaways

• Comprehensive licensing framework for credit funds
• Foreign investment participation
• Enhanced regulatory oversight mechanisms
• Focus on sustainable development of the sector