What is a Credit Guarantee Fund? Conditions for establishment of credit guarantee fund in Vietnam

What is a Credit Guarantee Fund? Conditions for establishment of credit guarantee fund in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is credit guarantee fund?

According to Clause 1, Article 2 of Decree 34/2018/ND-CP, credit guarantee fund means an off-budget financial fund which is established by the People’s Committee of province or central-affiliated city (hereinafter referred to as province) and operates for non-profit, capital maintenance and development purposes; extend credit guarantees to SMEs as prescribed in Decree 34/2018/ND-CP and relevant laws.

The credit guarantee fund operates in the form of a single-member limited liability company whose charter capital is wholly held by the state as prescribed in Decree 34/2018/ND-CP and relevant laws.

2. Conditions for establishment of credit guarantee fund in Vietnam

Specifically, in Article 5 of Decree 34/2018/ND-CP, the conditions for establishment of credit guarantee fund are specified as follows:

- Actually have at least VND 100 billion of charter capital at the time of establishment allocated by the provincial budget.

- Have the scheme for establishment of credit guarantee fund submitted by the People's Committee of province and approved by the People’s Council of province. The scheme must at least contain contents prescribed in Clause 1 Article 6 of Decree 34/2018/ND-CP.

- Have a draft of charter of organization and operation of credit guarantee fund in conformity with Decree 34/2018/ND-CP and other relevant laws.

- Have a list of expected members of credit guarantee fund including: President, Controller, Director, Deputy Director and Chief Accountant of credit guarantee fund who are qualified as prescribed in Articles 10, 11, 12 and 13 of Decree 34/2018/ND-CP.

3. Processes of establishment of credit guarantee fund in Vietnam

Processes of establishment of credit guarantee fund in Vietnam include:

(1) When there is a need to establish a credit guarantee fund, the People's Committee of province shall formulate a scheme for establishment of credit guarantee fund and then submit it to People’s Council of province for approval.

The scheme for establishment of credit guarantee fund shall at least contain:

- The need for establishment of credit guarantee fund, its contribution to the provincial socio-economic development; scale, scope, operation and its impact on provincial socio-economic development;

- Its operational plan and sources of funds, representing sources of charter capital allocated in the capital expenditures of local government budget (in the mid-term public investment plan approved by the competent authority) in accordance with Clause 1 Article 5 of Decree 34/2018/ND-CP;

- Have a draft of charter of organization and operation of credit guarantee fund in conformity with Decree 34/2018/ND-CP and other relevant laws;

- Have a list of expected members including President, Controller, Director, Deputy Director and Chief Accountant of credit guarantee fund who are qualified as prescribed in Decree 34/2018/ND-CP;

- Demonstration of organizational structure and operating mechanism of credit guarantee fund as stipulated in this Decree;

- Operation plan of credit guarantee fund prescribed in Article 14 of Decree 34/2018/ND-CP;

- Financial and operational plan of credit guarantee fund for 5 years since establishment and estimated performance to prove the feasibility of the establishment.

(2) If the establishment conditions are satisfied and the establishment is considered feasible, the People’s Council of province shall consider the following matters related to the establishment of credit guarantee fund: charter capital and sources of charter capital, called-up capital, model and organizational apparatus and other matters related to the credit guarantee fund under requirements of the People’s Council of province.

(3) According to the scheme for establishment of credit guarantee fund prescribed in Clause 1 hereof approved by the People’s Council of province, the People's Committee of province issues an establishment decision and a decision on approval for charter of organization and operation of the credit guarantee fund.

(4) Within 30 days from issuance of the decision on establishment of credit guarantee fund, the People's Committee of province shall give notices to the Ministry of Finance, the State Bank of Vietnam, the Ministry of Planning and Investment together with the establishment decision and the decision on approval for charter of organization and operation of the credit guarantee fund.

(5) Within 30 days from issuance of the decision on establishment of credit guarantee fund, the credit guarantee fund shall publish its establishment on means of mass media.

(6) Within 90 days from issuance of establishment decision of credit guarantee fund, the local government budget shall allocate full charter capital as prescribed in Clause 1 Article 5 of Decree 34/2018/ND-CP.

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