Multiple financial solutions for multidimensional poverty
Tam Nguyen, Ho Chi Minh City Community Manager
Ho Chi Minh City, 12 December 2014
In August 2013, Mr. Vũ Văn Ninh, the Deputy Prime Minister and Chairperson of the National Information on Sustainable Poverty Reduction, instructed the Ministry of Labour - Invalids and Social Affairs to propose a change in methodology from a one-dimensional to a multidimensional poverty approach. Consequently, Ho Chi Minh City was chosen at the end of 2013 to experiment with these multidimensional poverty metrics and solutions. The dimensions measured cover issues that range from education to health, housing, property ownership, and accessibility of services. In contrast to the concern that the city might have to develop brand new solutions for the new metrics, the multidimensional approach has already existed in HCMC, but was only waiting to be realized and redefined.
There is variety
To support the poor, HCMC already has different micro-finance funds (some new, some ten years old) serving different objectives:
- for loan repayment and livelihood improvement: the governmental funds include the National Fund for Hunger Elimination and Poverty Reduction and the Social Policies Bank
- for small start-up businesses: the Capital Aid Fund for Women in Economic Development
- for education: the Education Promotion Fund
- for vocational training: the Capital Aid Fund for Employment of the Poor
According to the 2009-2013 survey of the Mekong Development Research Institute (MDRI), 51 percent of the poor in HCMC had received approval from one of the different micro-finance funds, and many of them felt very positive about the simple procedures and quick results of these organizations. "Previously I was funded 5 million (USD $234), and was able to repay after one year. At the end of 2011, my daughter-in-law wanted to open a small grocery stall at home. I went to the office and was instructed by the staff of the Social Policies Bank. The procedures were really simple," said one participant in a group interview of the MDRI survey.
Cohesion is needed
On the more negative side, these various funds have been working toward only one target: the poverty line; and only one homogeneous group of customers: the poor. They have been pouring all the resources in without finely segmenting their specific customers. This issue has led to stories such as the one told in the MDRI group interview: "My daughter had only finished the 2nd grade. Our family wants her to go to vocational training, but the funds require at least a secondary school diploma. How can she go?" The family was not eligible for the vocational training funds, but could have been the right customer for the education fund. However, the education fund did not communicate its availability as well as the importance of literacy education before vocational education to its correct target, because of their unspecified metrics and ineffective methodology.
Now with the MPI being developed, each poor community will soon be depicted more precisely with their most relevant poverty dimensions, as roughly illustrated in the figure. The various micro-finance organizations, then, should be able to specifically answer the question, "Who needs what?" Subsequently, the funds' staff can inform poor households with small children that they can borrow student loans and not force their children skip school, or households with unemployed adults that they can borrow loans for vocational training before trying for start-up loans. Thus, these funds can add better awareness and accessibility to their existing availability.
Photos: CEP and Poor Migrants in Multidimensional Poverty (Oxfam and ActionAid Report, 2011)