The paper discusses methods of identifying the optimal lending rate for microfinance institutions and focuses on the application of internationally-acclaimed CGAP (Consultative Group to Assist the Poor) model to identifying the lending rate for microfinance institutions. | JED July 2013| 63 Identifying an Optimal Lending Rate Identifying an Optimal Lending Rate for the Sustainable Development of Microfinance Institutions in Vietnam Lê Văn Luyện Banking Academy luyenlvhvnh@ ARTICLE INFO Received: April 15, 2013 Received in revised form April 24, 2013 Accepted: June 15, 2013 Keywords: microfinance institutions optimal lending rate national microfinance network (M7) Affectionate Fund under Vietnam Women's Union ABSTRACT The paper discusses methods of identifying the optimal lending rate for microfinance institutions and focuses on the application of internationally-acclaimed CGAP (Consultative Group to Assist the Poor) model to identifying the lending rate for microfinance institutions. The paper also aims at providing a scientific overview that may help readers understand microfinance institutions, their operations in Vietnam and ways of applying CGAP lending rate identification model to local conditions and offer one more option to policy makers and other institutions. The research employs quantitative methods and data presented by M7 group at the workshop “Identification of Sustainable Interest Rate for Microfinance Institutions” held in Hà Nội in March 2012. 64 | Lê Văn Luyện | 63-73 1. INTRODUCTION In recent decades, the microfinance practice has been known as the operation of small-sized financial institutions. The practice aims to financially support the poor in the rural and urban areas. In Vietnam, in recent years, especially since Decree 28/2005/NĐCP was promulgated, official and semiofficial microfinance institutions have mushroomed and operated quite efficiently, contributing substantially to the poverty alleviation and hunger eradication in the rural and mountainous areas. However, there have appeared shortcomings through their operation, especially the determination of an appropriate lending rate, which must be tackled so as to develop Vietnam’s microfinance institution sustainably in Vietnam. In .
