View source for Vay mượn (Vietnam)

{{infobox 
| nameofpractice =Vay mượn
| flagemoji = 🇻🇳
| definition =Form of informal loan 
| location =Vietnam
| imagemap =Vietnam map.png
| clusters =
[[:Category:Market|Market]] – [[:Category: Functional ambivalence| Functional ambivalence]] – [[:Category: System made me do it| System made me do it]] – [[:Category: Survival| Survival]] – [[:Category: Informal welfare| Informal welfare]] 
| categories =
[[:Category:Vietnam|Vietnam]] – [[:Category: Southeast Asia| Southeast Asia]] – [[:Category: Loan| Loan]] – [[:Category: Credit| Credit]] 
| authorofpiece =Abel Polese
| authorinstitution =School of Law and Government, Dublin City University
| authorwebsite =[https://www.dcu.ie/law_and_government/people/Abel-Polese.shtml Profile page at DCU]}}
<big>'''By Abel Polese, School of Law and Government, Dublin City University'''</big>
[[Category:Market]] 
[[Category: Functional ambivalence]] 
[[Category: System made me do it]] 
[[Category: Survival]] 
[[Category: Informal welfare]] 
[[Category:Vietnam]] 
[[Category: Southeast Asia]] 
[[Category: Loan]] 
[[Category: Credit]] 
[[Category:Entry]] 
[[Category: Volume 2]] 
{| class="wikitable"
|- 
|style="font-size:1.1em;"| Both ''vay'' and ''mượn'' refer in Vietnamese to the act of borrowing money. Used together, they come to mean ‘borrowing from all available sources.’ This describes a situation where an individual, a couple or a family collects funding from a variety of sources to buy property or start a business.
|}

The practice is fuelled by three main factors. The first is the large number of people in
Vietnam who are informally employed. Because of the informal nature of their contract and hence
of their income, many self-employed workers cannot meet the formal requirements to apply for a
mortgage. Second, many ordinary people tend not to trust the banks<ref>Le, N. and Nguyen, T. 2009. ‘The Impact of Networking on Bank Financing: The Case of Small
and Medium‐Sized Enterprises in Vietnam,’ Entrepreneurship Theory and Practice 33 (4): 867-87</ref>. Third,
the idea of a mortgage runs against prevailing ideas of property in Vietnam and, while mortgages
are becoming more commonly accepted in urban areas, banks have so far identified few if any
products that both meet the needs of potential customers and that manage risk in such a way as to
enable the banks to loan money to private borrowers.

In 1986, Vietnam launched a series of reforms known as ''Đổi Mới'' (English: ‘renovation’).
Aimed at moving Vietnam toward a socialist-oriented market-economy, these reforms included
allowing competition between the state and the private sector in non-strategic sectors of the
economy. While the state formally retained ownership of land, it now allows land to be privately
rented. This has led to substantial growth in private agricultural investment and production<ref>Kerkvliet, B. 2005. The Power of Everyday Politics: How Vietnamese Peasants Transformed
National Policy. Ithaca: Cornell University Press</ref><ref>Fforde, A. 2007. Vietnamese State Industry and the Political Economy of Commercial Renaissance:
Dragon’s Tooth or Curate’s Egg? Oxford: Chandos Publishing</ref>.

These reforms have enabled private individuals to rent property, set up companies and carry
out most of the activities that are commonplace in market economies. Modernisation has taken
place relatively quickly and entrepreneurship has flourished<ref>Szalontai, B. 2008. ‘The Diplomacy of Economic Reform in Vietnam: The Genesis of Doi Moi,
1986-1989,’ Journal of Asiatic Studies 51 (2): 199-252</ref>. Even so, the
availability of start-up capital remains limited, not least because interest-rates on loans remain
relatively high. In 2015, for example, the interest rate stood at 7.1 percent<ref>World Bank http://data.worldbank.org/indicator/FR.INR.LEND?locations=VN&amp;view=chart</ref>. (This
was however the lowest rate for the previous decade, which saw interest rates peak of 17 percent in
2011.)

In these circumstances, ''vay mượn'' has proved an effective mechanism for satisfying the
demand for start-up capital. The practice is based on social solidarity and a scaled approach to
secure money. Once someone decides that they need capital in order to make an investment, they
discuss the issue with their close relatives who, depending on their own financial situation and the
level of trust they feel for the borrower, will offer a sum of money, possibly at zero interest, to be
repaid within a flexible timeframe. 

The lender may seek to agree a deadline by which the loan
should be repaid, but will in practice have no formal means of enforcement. Unlike a formal bank-
loan, for example, the lender cannot repossess property in the event of a delay or failure to repay a
loan. Even so, the practice is commonplace and remains widely used. This is because there are
social and moral mechanisms in place to punish those who fail to repay loans. A borrower who fails
to repay risks losing face and reputation, as well as the loss of family and social connections. As a
result, the borrower has every interest in repaying the loan as quickly as possible. Moreover, the
borrower may in future be invited to reciprocate and to offer a loan to another relative, and so the
practice continues.

In cases where an aspiring borrower’s close relatives are unable to come up with as much
money as is needed, the borrower will approach extended-family members or close friends. The
capacity to request a loan, and to be trusted by others, depends largely on one’s personal reputation.
One is unlikely to be lent money if one is seen as unreliable and if one has a track-record of
defaulting on loans. An exception might be a relative in dire circumstances, in which case relatives
might become more flexible and lend money in spite of higher risks of non-repayment. Interest rates
tend to be zero, or close to zero, when money is borrowed from very close relatives. Rates are
however likely to be higher when a borrower approaches friends or distant relatives, and when the
sum in question is substantial. 

In such circumstances, the interest rate is likely to depend not only
on how likely the borrower is expected to repay the money on time, but also on the nature of the
personal relationship between the borrower and the potential lender. Every loan is negotiated on a
case-by-case basis. If, for example, the lender thinks that one day they may need the borrower’s
services, they may suggest a zero interest rate that will give them informal credit with the borrower,
enabling them to request a return favour at some future date. It may also be the case that a potential
lender (A) owes a favour to or is dependent on someone (B) who, in turn, requests assistance for a
borrower (C). In such circumstances, A may consider assisting C as a means of repaying a debt to
B.

How much and from whom to borrow depends largely on individual choices. The practice of
informal loans is acceptable both socially and legally. The only real danger vay mượn presents is
that people may fall victim to loan sharks when trying to borrow from outside their closest circle.
While the practice is well known and openly discussed in Vietnam, it has not as yet been closely
studied in the academic literature.

==References==
<references />

==Further reading==
Hakkala, K. and Kokko, A. 2007. The state and the private sector in Vietnam. Stockholm: European
Institute of Japanese Studies<br>
Kurfürst, S. 2012. ‘Informality as a strategy: Street traders in Hanoi facing constant insecurity,’ in
McFarlane, C. and Waibel, M. (eds), Urban Informalities: Reflections on the Formal and Informal.
Farnham: Ashgate: 89-111<br>
Nguyen, H., Nordman C. and Roubaud, F. 2013. ‘Who suffers the penalty? A panel data analysis of
earnings gaps in Vietnam,’ Journal of Development Studies 49 (12): 1694-710<br>
Nguyen, H. and Nordman, C. 2014. Household entrepreneurship and social networks: Panel data
evidence from Vietnam. Working document DT-22 2014<br>
Tenev, S., Carlier, A., Chaudry, O. and Nguyen, Q. 2003. Informality and the playing field in
Vietnam&#39;s business sector. World Bank Publications