Improving capital absorbability for agricultural credit

15:03 | 21/03/2014 Economy

(VEN) - The government has continued to adopt mechanisms and policies to invest in agricultural development. However, finding solutions to effectively use the capital is needed.

The government prioritizes to grant credit for the agricultural sector

In the first two months of this year, while macroeconomics positively changed, inflation was curbed, interest rates tended to decline and capital in credit institutions remained abundant, credit for the economy declined by 1.66 percent compared to the last month of 2013.

To promote production and business activities, the government asked the State Bank of Vietnam (SBV) to further drop lending rate in accordance with macroeconomic development. In addition, the government coordinated with ministries and departments to adopt credit programs for agricultural development, with a priority given to production models.

According to SBV, to implement the government resolution, the SBV will spend a significant amount of capital on agricultural and rural development. Credit institutions have also actively implemented the resolution. In particular, the Vietnam Bank for Agriculture and Rural Development (Agribank) set out a goal in 2014 to increase the percentage of outstanding loans to at least 72 percent of total outstanding loans for the agricultural sector. Agribank has also directed its network to ensure enough capital to increase agricultural credit.

The government has paid special attention to investment in the agricultural sector in recent years. However, capital absorption and effective use of capital have remained low. Farmers in rural and remote areas often produce based on their need rather than market demands. Therefore, agricultural products cannot be sold and farmers are unable to repay the bank. This is an important reason together with the government’s mechanisms and policies leading to difficult access to bank credit.

Many experts said that together with the government’s mechanisms and policies, finding solutions to help farmers effectively use the capital is needed. According to experts, planning specific production areas, encouraging farmers to participate in production and business activities and supporting farmers to look for markets are needed. In addition, local government should cooperate with state management agencies and departments to develop cooperative, technical performance and large-scale rice field models in order to support farmers. Based on these solutions, banks should actively adopt and implement appropriate credit programs, contributing to improving effectiveness for loan packages. If farmers do business effectively, they will repay debts and credit operations will become more sustainable.

Credit programs for the agriculture and rural development sector mainly focus on production models. Therefore, the government should combine policies in terms of investment attraction, technology transfers and high-quality agricultural product processing, contributing to improving the effectiveness of credit programs./.

By Lan Ngoc