How long is the term of internal lending by cooperatives and cooperative unions in Vietnam?
What are the conditions for internal lending by cooperatives and cooperative unions in Vietnam?
Pursuant to the provisions of Clause 2, Article 83 of the Law on Cooperatives 2023, regulations on internal lending by cooperatives and cooperative unions are as follows:
Internal lending by cooperatives and cooperative unions
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2. In order to perform internal lending transactions, a cooperative or cooperative union shall be required to meet the following conditions:
a) The cooperative or cooperative union operates under the fully-organized management model and has established a Board of Controllers consisting of at least 03 members;
b) The cooperative or cooperative union only grants internal loans after it has allocated sufficient capital for its business; internal loans shall be granted without use of capital raised from either its members or external entities;
c) Internal loans must be monitored and recorded on separate accounts.
d) Internal lending transactions must be approved by its GMM and specified in its charter.
Thus, in order to perform internal lending transactions, a cooperative or cooperative union shall be required to meet the following conditions:
- The cooperative or cooperative union operates under the fully-organized management model and has established a Board of Controllers consisting of at least 03 members;
- The cooperative or cooperative union only grants internal loans after it has allocated sufficient capital for its business; internal loans shall be granted without use of capital raised from either its members or external entities;
- Internal loans must be monitored and recorded on separate accounts.
- Internal lending transactions must be approved by its GMM and specified in its charter.
How long is the term of internal lending by cooperatives and cooperative unions in Vietnam?
How long is the term of internal lending by cooperatives and cooperative unions in Vietnam?
Pursuant to the provisions of Clause 1, Article 83 of the Law on Cooperatives 2023, regulations on internal lending by cooperatives and cooperative unions are as follows:
Internal lending by cooperatives and cooperative unions
1. Internal lending means a cooperative or cooperative union’s grant of loans with a term of not exceeding 12 months to its official members for the purposes of supporting their business and improving their living conditions following the rule of voluntariness, self-responsibility, non-profit making, capital conservation, sufficient debt repayment and offsetting of internal lending costs. Internal lending transactions are not considered as banking activities as prescribed by the Law on credit institutions.
Thus, Internal lending means a cooperative or cooperative union’s grant of loans with a term of not exceeding 12 months to its official members.
Borrowing members must follow the rule of voluntariness, self-responsibility, non-profit making, capital conservation, sufficient debt repayment and offsetting of internal lending costs.
Note: Internal lending transactions are not considered as banking activities as prescribed by the Law on credit institutions.
Can cooperatives and cooperative unions raise capital for internal lending in Vietnam?
Pursuant to the provisions of Clause 1 and Clause 2, Article 79 of the Law on Cooperatives 2023, regulations on raising capital and receiving financial assistance, grants and donations are as follows:
Raising capital and receiving financial assistance, grants and donations
1. Each cooperative or cooperative union shall firstly use capital raised from its members for making investments and developing its business under a specific agreement made with its members.
2. If the amount of capital raised from its members is not sufficient to meet its business needs, the cooperative or cooperative union may raise capital from other sources as prescribed by laws and its charter.
Pursuant to the provisions of Point b, Clause 2, Article 83 of the Law on Cooperatives 2023, regulations on internal lending by cooperatives and cooperative unions are as follows:
Internal lending by cooperatives and cooperative unions
...
2. In order to perform internal lending transactions, a cooperative or cooperative union shall be required to meet the following conditions:
a) The cooperative or cooperative union operates under the fully-organized management model and has established a Board of Controllers consisting of at least 03 members;
b) The cooperative or cooperative union only grants internal loans after it has allocated sufficient capital for its business; internal loans shall be granted without use of capital raised from either its members or external entities;
c) Internal loans must be monitored and recorded on separate accounts.
d) Internal lending transactions must be approved by its GMM and specified in its charter.
Thus, internal loans shall be granted without use of capital raised. Therefore, cooperatives and cooperative unions are not allowed to mobilize capital for internal financing.
The Law on Cooperatives 2023 will take effect from July 1, 2024
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