The Vietnamese MFI TYM Fund (a detailed MixMarket report can be found here) contacted the P&D Network with a request for assistance in the development of a voluntary micro pension scheme in June 2011. After the initial preparations, a team of two consultants, consisting of Job Harms of Triodos Facet and Boudewijn Sterk of the P&D Network, spent one week in Vietnam to assess the opportunities for TYM Fund to develop and implement a voluntary micro pension product.
Part of the Vietnamese Women's Union
The TYM Fund is the microfinance arm of the Vietnamese Women’s Union (VWU). The VWU itself is a branch of the Communist Party in Vietnam, and focuses on improving the lives of poor women living in the rural areas of Vietnam.
The VWU decided to start their own microfinance organization, TYM Fund, in order to improve the lives of its female members. TYM Fund offers its financial services to VWU members by making use of the communal network of the VWU (the VWU has established its presence in most rural cities and town in Vietnam and has 11 million female members). TYM operates 44 outlets in 10 northern and central Vietnamese provinces from Phu Tho to Nghe An.
Product range of TYM Fund
The current micro pension product offered by TYM Fund to its 65,000+ members is mandatory and part of a larger insurance package for 'loan protection'. This insurance package is mandatory for all clients of TYM Fund, who spent 0.4% of their loan amount per year on this package containing Life Insurance, Hospitalization, Loan Protection and Pension.
However, TYM Fund wants to upgrade its existing mandatory pension provision to a voluntary micro pension product that is adapted to the demands of TYM’s clients. According to TYM, a newly developed pension product should guarantee an income at 55 years of age and should provide flexible benefits (i.e. also include benefits that can be enjoyed before the retirement age) to make it suitable for clients.
As part of the technical mission, both Boudewijn and Job were invited on a field visit to one of the weekly meetings of TYM Fund clients, held in a village at about 1 hour drive outside of Hanoi. Here the team had a chance to become acquainted with the operational procedure of TYM Fund, as well as with some of its clients.
From our field visit to TYM clients we learned that before clients can actually start saving for their pensions, their children should have grown up and moved out of the house. Although the age for starting pension savings differ per household, it is safe to assume that this lies somewhere between 30 – 35 years. Also, a characteristic of the Vietnamese culture is that people rather invest savings immediately if they see an opportunity, than to wait for returns in the future. Both characteristics make developing a successful micro pension product very challenging.
The way forward
Both TYM Fund and P&D Network are currently researching possibilities to move the micro pension project forward. The P&D Network is in its final stage of selecting a partner from its network that will participate in the micro pension project. We estimate that the launch of this micro pension project will take place between March and April 2012.