Farmers will be allowed to borrow up to 500 million VND (26,300 USD) without collateral, five times higher than the current limits, according to a Government decree on credit regulations intended to raise agricultural and forestry production.

Tran Thi Hong Hanh, deputy head of the State Bank of Viet Nam (SBV)'s Credit Department, said the decree aims at instituting a suitable mechanism for credit institutions to pool their credit in the agricultural sector and for farmers to more easily access money via support policies when faced by natural disasters or epidemics.

Under the decree to be effective as of June, households engaged in cropping, forestry, aquaculture and salt production will be eligible for loans of up to 50 million VND (2,600 USD) from banks without mortgaging any assets.

Those engaged in trading and providing services related to agriculture and rural development can borrow up to 200 million VND (10,520 USD).

All they need is their land-use right certificate for their farmland.

Borrowers without land deed must have a certificate from their commune People's Committee proving their lands are not encumbered in any other way.

The decree also regulates that based on the necessary period of time for capital circulation and the borrowers' production plans, credit institutions and the borrowers can reach agreement on the appropriate length of loan repayments.

When natural disasters or epidemics directly prevent borrowers from making scheduled repayments, credit institutions will need to consider extending the loan term on the basis of possible repayments, or provide the farmers with a new loan.

In cases where large scale natural disasters or epidemics take place and are recognised by provincial People's Committees and Ministries of Health and Agriculture and Rural Development, the Government will provide support to the borrowers and credit institutions will not ask interest payments for a maximum two-year period.

Nguyen Thi Mui, member of the Advisory Board for National Monetary Policy, said that to ensure the effectiveness of the decree, it is necessary to consider setting suitable interest rates. Current rates of 14 per cent in industry and trade are manageable, but unaffordable for the agricultural sector.

Vu Minh Tan, deputy general director of Agribank, said that in the coming period, the bank would specify the terms and interest rates for borrowers involved in agricultural production.

Hanh of SBV's Credit Department said that banks have an important role to play in providing consultation to farmers who intend to borrow money, allowing them to take full advantage of their business plans./.