Financing for agricultural and rural development with a reasonable loan period and low interest rates has proven effective in ensuring the efficiency of agricultural production and increasing profits for farmers, the Nhan Dan (People) online newspaper reported.
Following the Government’s direction, the State Bank of Vietnam (SBV) has strengthened co-operation with related authorities, agencies and the banking system to develop better financial programmes for the field.
Given that approximately 70 percent of the Vietnam’s population lives in rural areas, agricultural production has made tremendous contributions to national socio-economic development. The sector has drawn great attention from the Party and State, resulting in a range of guidelines and policies, among which the Government Decree No. 41/2010/NĐ-CP on credit policy for the development of agriculture and rural areas is considered an important breakthrough.
To date, it is not only the Vietnam Bank for Agriculture and Rural Development (Agribank) that has played a key role in providing credit programmes for agricultural sector.
Most commercial banks - such as Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Bank for Foreign Trade of Vietnam (Vietcombank), Bank for Investment and Development of Vietnam (BIDV) and Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) - are supporting the agriculture sector by providing aquaculture loans, buying rice for temporary storage, and issuing loans for agricultural exports and tea and coffee purchasing and processing.
Prior to Decree 41, loans provided for of agricultural and rural development reached just 293 trillion VND (13.7 billion USD) in 2009, yet, at the end of the second quarter of 2013, the figure increased over 2.2-fold to more than 621 trillion VND (29.2 billion USD).
As of September 2013, many localities had recorded positive results in credit operations, including in Hanoi, where outstanding loans reached 46.9 trillion VND, an average annual growth of 25.3% (from 2010 to 2013), and in Ha Giang province with 3.8 trillion VND and an average annual growth of 17%.
However, difficulties and shortcomings do exist. Due to the poor planning and management of agricultural production and businesses, the increased credit to the sector has still not met the demand and vast potential to develop high-tech agriculture with sustainable high-added values remains untapped.
Besides, Vietnamese seafood products are threatened by the unfair anti-dumping laws of some countries, improper aquaculture planning, and inefficient investment, creating negative impacts on credit quality and scaring away investors.
Dr. Nguyen Van Thanh, Chairman of the Deposit Insurance of Vietnam Board of Directors, admitted that bank loans have contributed greatly to socio-economic development and poverty reduction in the past years, though agricultural credit operations still face many challenges.
Taking the reality of economic development in the Mekong Delta as an example, rice and fruit planting along with aquaculture farming have been almost spontaneously developed in a fragmented manner and on a small scale, resulting in low quality and large losses.
According to LienVietPostBank Vice Chairman Nguyen Duc Huong, unstable prices and frequent natural disasters are among the common reasons that discourage farmers from borrowing from banks, and for which banks decide not to offer loans.
In rural areas, underdeveloped agricultural credit insurance seriously affects farmers’ ability to repay, as it does not cover large variations in price due to natural disasters or epidemics. For that reason, banks only lend moderate amounts of capital.
SBV Governor Nguyen Van Binh said that this year, credit programmes for the development of agriculture and rural areas focus on a number of major important fields such as science and technology in agricultural production, new production model development, and seafood exports.
SBV is currently co-ordinating with the Ministry of Agriculture and Rural Development and the Ministry of Science and Technology to develop suitable mechanisms to help credit institutions expand investment in the sector, especially to agricultural production operations with strong application of advanced technologies.
According to SBV Credit Department Head Nguyen Viet Manh, the newly developed credit programmes will be applied first in some effective large-scale production models, including the dairy farms of TH Group, some southern seafood processing plants and the large-scale rice field models in the Mekong Delta.
Manh suggested that, in order to develop effective credit policies, it is necessary to have detailed planning for each sector and production region and to ensure smooth connections between partners in supply and consumption.
Dr. Huong stressed the need to create breakthroughs in vision, policies and measures for the sector’s growth, focusing on allowing agricultural land accumulation to develop large-scale fields, forming a value chain from production to processing, and adopting agricultural enterprise equitisation.
It is also necessary to attract further investment from both domestic and foreign sources in agriculture and rural development, Huong said, adding that mechanisms for agricultural credit insurance development are crucial to supporting farmers and agriculture businesses. In addition, stimulating banks to maintain a minimum ratio of 20% of their capital for agriculture and rural development is considered a practical measure that could facilitate credit activities in the field, as banks are still the main providers of loans to the sector.-VNA
Following the Government’s direction, the State Bank of Vietnam (SBV) has strengthened co-operation with related authorities, agencies and the banking system to develop better financial programmes for the field.
Given that approximately 70 percent of the Vietnam’s population lives in rural areas, agricultural production has made tremendous contributions to national socio-economic development. The sector has drawn great attention from the Party and State, resulting in a range of guidelines and policies, among which the Government Decree No. 41/2010/NĐ-CP on credit policy for the development of agriculture and rural areas is considered an important breakthrough.
To date, it is not only the Vietnam Bank for Agriculture and Rural Development (Agribank) that has played a key role in providing credit programmes for agricultural sector.
Most commercial banks - such as Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Bank for Foreign Trade of Vietnam (Vietcombank), Bank for Investment and Development of Vietnam (BIDV) and Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) - are supporting the agriculture sector by providing aquaculture loans, buying rice for temporary storage, and issuing loans for agricultural exports and tea and coffee purchasing and processing.
Prior to Decree 41, loans provided for of agricultural and rural development reached just 293 trillion VND (13.7 billion USD) in 2009, yet, at the end of the second quarter of 2013, the figure increased over 2.2-fold to more than 621 trillion VND (29.2 billion USD).
As of September 2013, many localities had recorded positive results in credit operations, including in Hanoi, where outstanding loans reached 46.9 trillion VND, an average annual growth of 25.3% (from 2010 to 2013), and in Ha Giang province with 3.8 trillion VND and an average annual growth of 17%.
However, difficulties and shortcomings do exist. Due to the poor planning and management of agricultural production and businesses, the increased credit to the sector has still not met the demand and vast potential to develop high-tech agriculture with sustainable high-added values remains untapped.
Besides, Vietnamese seafood products are threatened by the unfair anti-dumping laws of some countries, improper aquaculture planning, and inefficient investment, creating negative impacts on credit quality and scaring away investors.
Dr. Nguyen Van Thanh, Chairman of the Deposit Insurance of Vietnam Board of Directors, admitted that bank loans have contributed greatly to socio-economic development and poverty reduction in the past years, though agricultural credit operations still face many challenges.
Taking the reality of economic development in the Mekong Delta as an example, rice and fruit planting along with aquaculture farming have been almost spontaneously developed in a fragmented manner and on a small scale, resulting in low quality and large losses.
According to LienVietPostBank Vice Chairman Nguyen Duc Huong, unstable prices and frequent natural disasters are among the common reasons that discourage farmers from borrowing from banks, and for which banks decide not to offer loans.
In rural areas, underdeveloped agricultural credit insurance seriously affects farmers’ ability to repay, as it does not cover large variations in price due to natural disasters or epidemics. For that reason, banks only lend moderate amounts of capital.
SBV Governor Nguyen Van Binh said that this year, credit programmes for the development of agriculture and rural areas focus on a number of major important fields such as science and technology in agricultural production, new production model development, and seafood exports.
SBV is currently co-ordinating with the Ministry of Agriculture and Rural Development and the Ministry of Science and Technology to develop suitable mechanisms to help credit institutions expand investment in the sector, especially to agricultural production operations with strong application of advanced technologies.
According to SBV Credit Department Head Nguyen Viet Manh, the newly developed credit programmes will be applied first in some effective large-scale production models, including the dairy farms of TH Group, some southern seafood processing plants and the large-scale rice field models in the Mekong Delta.
Manh suggested that, in order to develop effective credit policies, it is necessary to have detailed planning for each sector and production region and to ensure smooth connections between partners in supply and consumption.
Dr. Huong stressed the need to create breakthroughs in vision, policies and measures for the sector’s growth, focusing on allowing agricultural land accumulation to develop large-scale fields, forming a value chain from production to processing, and adopting agricultural enterprise equitisation.
It is also necessary to attract further investment from both domestic and foreign sources in agriculture and rural development, Huong said, adding that mechanisms for agricultural credit insurance development are crucial to supporting farmers and agriculture businesses. In addition, stimulating banks to maintain a minimum ratio of 20% of their capital for agriculture and rural development is considered a practical measure that could facilitate credit activities in the field, as banks are still the main providers of loans to the sector.-VNA
