VAPF 07: Credit Policy in agriculture and rural development: Current situation and solutions

On 29th September 2016, Institute of Social Studies, Economics and Environment (iSEE) coordinates with Vietnam Institute of Economic and Policy Research (VEPR)  to organize Vietnam Agriculture Policy Forum no.7 with the topic of “Credit Policy in agriculture and rural development: Current situation and solutions”

Agriculture Policy forum is an event in the series of events organized by the Agriculture Coalition with the participation of scientists, managers, policy makers, the press with the aim to discuss important policies in the field of agriculture.

In the opening speech, PhD. Nguyen Duc Thanh- Director of Vietnam Institute of Economic and Policy research (VEPR) – Coordinator of the Agriculture Coalition, said that although there are policies to incentivize credit flows in to agriculture such as lowering the required reserved ratio, refinancing to direct the flow into agriculture, … the proportion of credit flows in agriculture is still very low.

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After the opening ceremony, Mr. Le Duc Thinh, Deputy director of Economic Cooperation and Rural Development, Ministry of Agriculture and Rural Development (MARD) presented the overview of credit policy in Vietnam and policy bottlenecks.He pointed out that time limit and loan limits are not suitable for agricultural production cycle.Besides, credit policies have not integrated with other policy systems in agriculture (insurance and labor market).

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PhD. Hoang Cam- Institute of Culture Studies presented current situation on credit financing among minority farmers in Viet Nam and suggested that the majority of minority farmers in Central Highland are suffering from different debts from 50 to 240 million. Most of the farmers, however, take loans from usury with interest rate up to 50 to 60 percent per year to finance their production instead of taking loans from banks with relatively lower standard rate.

The reason farmers take usury, according to PhD. Hoang Cam, vary, from having no collaterals, cumbersome procedures, or long waiting time with limited amount of money which is not enough to finance their production. Meanwhile, private loans are easy, do not require collaterals and meet farmers’ demands as they can lend farmers a higher amount of money.

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Ms. Nguyen Thi Hien Phuong-  Deputy Director of Opportunity Fund for women in economic activities In Dak Nong Province shared her experience in micro-credit financing in some provinces and offered policy recommendations. She said there were some micro-finance organization for poor farmers. Farmers would take loans from these organizations to some extent helped reduce usury. However, current organizations have not met farmers’ demand.

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PhD. Yoshihara Kiyotsugu, Kyoto University, Japan addressed current situation of credit financing in Japan and acknowledged that credit financing had only existed in some provinces and often focused on small and medium enterprises, based on the principle of “Supporting each other” and are not for profit. Meanwhile, in Viet Nam, credit financing organization are often operated according to their sector (trade, agriculture, marine…) on different scale and are still operating for profits

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Mr. Nguyen Thanh Tung, representative of International Fund for Agriculture Development considered the flexibility in supplying micro-finance service will help farmers get access to these services easier, especially because along providing micro-finance service, farmers are also equipped with knowledge and skills before actually lending them the loan so that farmers can optimize their money.

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At the Forum, experts said that we should continue to restructure loans commercial banks offer, redirecting it more to agriculture sector, especially mid and long term loans. Besides, banks should simplify the process and requirements when it come to loans for agriculture. Banks should also diversify credit program for agricultural products so that they can be match with different agricultural product life cycle. Training for staffs in charge of credit financing in agriculture development should also be a focus. It is also necessary to maintain agriculture insurance and develop labor market for agriculture sector.

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