The services available to Hanoi’s poor are extremely limited and often inaccessible to those most in need. Migrants and seasonal workers, often among the city’s poorest residents, are by default not eligible for the poor list because they are not official Hanoi residents. Furthermore, they are unable to access decent housing and financial services.
As most of Hanoi’s poor are self-employed in the informal sector, they often require loans for working capital and consumption. Unfortunately, microfinance services in urban areas are rarely available. The survey data confirms the lack of choice when Hanoi’s poor are in need of credit. The overwhelming majority of respondents, 73.9%, take private loans from relatives or friends. Even the services of informal money lenders, often the next most popular alternative when the formal financial system is inaccessible (compare with ATM Bulletin 17 “Manila’s Poor”), are only used by 7.8% of these individuals.
The poor are also deprived when it comes to health services. If they are unable to afford health insurance at market rates, they are forced to pay out-of-pocket for every treatment. An ongoing commercialization of health services has further worsened the gap between the affluent and the poor. The UNDP Human Development Report notes that attempts to ensure sustainable social service funding have led “to the increasing commercialization of public social services, and over-reliance on user fees by service delivery organizations.” More than 50% of respondents have difficulties in paying for health treatments. As a result, many choose to self-medicate or leave their ailments untreated. Moreover, over a third (36%) of those who make use of locally available clinics are dissatisfied with the service quality.
As we explain in our new report, ATM Bulletin 18 “Empowering Hanoi’s Poor”, there are a number of viable strategies to narrow the service gap and reduce urban poverty in Vietnam’s capital. These include a stronger focus on building social enterprises– for example, in the service and tourism sector– as well as comprehensive access to financial services for micro-entrepreneurs through affordable microfinance.
Both of these strategies focus on empowerment rather than direct provision of services. Although building clinics and schools for the poor can be effective at times, microfinance institutions provide the poor with the capital they need to start and grow their own businesses. Secondly, these approaches are also more financially sustainable because they are run on a for-profit basis and allow the organizations to expand their services both in reach and in duration.
The resulting improvements in household income will, in the long run, enable the beneficiaries to access and pay for existing services, without depending on handouts from the government.
Taufik Indrakesuma & Johannes Loh are research associates at the Asian Trends Monitoring Bulletin at the Lee Kuan Yew School of Public Policy, University of Singapore.