Agricultural, Rural and Farmer Credit: Three-spearhead Attack

Delegates said at the workshop that the economic development towards an industrialised economy meant rationally developing the structure of pure industry, industry in service sector and industry in agricultural sector. Banking services for agriculture, rural area and farmers should be developed in both quantity and quality.

 

The Vietnamese agriculture is being developed comprehensively and strongly to become a commercial agriculture to not only meet the domestic market but also export to other countries. Vietnam is a nation with good agriculture, forestry, tourism, seaport and fishery. Most natural strengths are lying in rural areas and in households. Thus, the mission of banks is to provide more comprehensive services for agriculture, rural area and farmers.

 

Credits for farming households have actually become a level to boost the Vietnamese agriculture. Many credit organisations have made present in rural areas, including the Vietnam Bank for Agriculture and Rural Development (Agribank), the Vietnam Bank for Social Policies (VBSP), local people’s credit funds, socio-politics organisations and others. They have become a capital channel for farmers. Agribank has held the core role for long. Outstanding loans for farming households accounted for nearly 30 per cent of the country’s total outstanding loans and Agribank supplied up to 90 per cent of that. Most farming households have access to bank loans. Agribank reportedly is lending VND150,500 billion (US$9.12 billion) to farmers. The credit market for agriculture and rural area has been widened and farmers can now borrow in larger values.

 

Commercial banks and credit organisations have provided thousands of billions of Vietnamese dong to help farmers to foster agricultural development and rationalise crop restructure to enhance productivity and improve incomes. The borrowed money enabled farmers to establish specialised areas to grow rice, vegetables and industrial trees with greater yields. For instance, they have developed rice-growing areas in the Red Delta region and the Mekong Delta region, long-day industrial crops in the Central Highlands and fruit trees in central region and northern mountainous provinces.

 

Credits for career training have helped restructure rural economy towards higher proportion of industry and service and lower proportion of agriculture. Loans for rural infrastructure construction (electricity and road), for small and medium enterprise expansion, are also developed. Remarkably, credits for commercialising traditional industries like agro-forestry product processing, husbandry, carpentry, embroidery and furniture manufacturing have generated satisfactory results. The clear examples are handicraft production in Bac Ninh, bamboo handicraft and silk production in Ha Tay and pottery production in Bat Trang (Hanoi). Currently, the country has more than 2,000 villages with traditional industries, which create jobs for some 1.4 million households and more than 10 million labourers. The wooden handicraft export value rose from US$235 million in 2001 to US$450 million in 2004. The current earning is many times higher. Vietnamese exported products have been shipped to more than 100 countries and territories in the world, including the United States, Japan, Spain, Belgium, China and Taiwan. Handicraft production and supporting service sectors recorded an annual growth of 15 per cent on average.

 

Banks also lend farms to expand production and attract workers. The lending value for a farm rose from VND200 million to VND300 million. Many farms can borrow up to VND500 million. Currently, Vietnam has more than 113,730 farms, nearly doubling the figure in 2001. They acquire 663,500 hectares of land and create jobs for 395,000 labourers.

 

Besides, banks also provide soft loans for farmers under government-backed projects. Their loans normally tied to processing and selling of agricultural products and consolidation of rural infrastructure. Total outstanding loans in the south-eastern region now value VND285,000 billion, in which short-term loans account for VND176,000 billion (62 per cent) and medium and long-term loans made up VND109,000 billion (38 per cent), mainly in Ho Chi Minh City. The Central Highlands now has total outstanding loans of 28,000 billion, in which short-term loans account for 64 per cent and medium and long-term loans 36 per cent. As many as 652,000 households and 1,229 enterprises are now holding outstanding loans. To facilitate expansion of credit relations, banks create favourable conditions for borrowers to settle interests and principals after harvesting crops or selling domestic animals. They do not apply overdue interest rate if the deferred debt payment is resulted from objective reasons.

According to Agribank, the demand for capital always increases because business scales are expanded. With an average lending value of VND10 million per household, borrowers can only follow micro-production. To make agriculture commercial and rural areas prosperous, the average lending value must be at least VND20 million a household from now until 2015 and above VND30 million in 2020.

 

Despite abovementioned encouraging results, bank loans did not produce satisfactory results. Not all loans have high usage efficiency, the proportion of agriculture in GDP remains high and agriculture has not closely tied to processing and marketing activities. The lending value for farmers remains too modest to expand production and it is only enough for paying basic expenses for cultivation, husbandry and caretaking. Loans are mainly provided for delta farmers.

 

To boost credits for agriculture, rural area and farmers, banks and people’s credit funds need to have specific policies for specific locations. Banks need to provide medium and long-term credits to all economic sectors to develop infrastructure and restructure farming. Their lending needs to focus on renovating production, processing and preserving technologies and increase the proportion of highly valued products and processed goods, and diversifying products for domestic and international markets. Banks should back farmers to sell their products and provide support for them at reasonable level as our country maintains lower protection for agricultural products than WTO rules.

 

Hoai Nam