09:39 | 12/04/2016 Economy
(VEN) - Vietnam has launched many preferential funding programs on agriculture. However, efficiency remains modest. For this reason, the Japan International Cooperation Agency (JICA) recently proposed an assistance program which intends to make it more able for farmers to access capital for high-tech farming development.
Delegates' discussion at the conference - Photo: laodong.com.vn
Multiple assistance policies
At a recent conference Towards Sustainable Agricultural Finance in Vietnam – from Lam Dong Province’s Model, the State Bank of Vietnam’s Credit Department Director Tran Van Tan said that the State Bank has put in place comprehensive credit policies and money policy tools to provide capital for the farming sector.
Specifically, the State Bank has regulated ceiling interest rates of short-term loans in Vietnam dong for agriculture and rural development. The rates are always 1-2 percent less than other production sectors. The State Bank has also issued Circular 20/TT-NHNN reducing the obligatory reserve rate for credit institutions with a high balance of outstanding loans for agriculture and rural development, which accounts for more than 40 percent of the balance of their outstanding loans. The State Bank has also prioritized refinancing credit institutions, which have high balance of outstanding loans for agriculture and rural development but face difficulties in terms of capital.
In addition, the government has launched special credit programs such as loans for the purchase and temporary reserve of rice, providing funds for fishermen in order for them to build and upgrade fishing boats in accordance with Decree 67/2014/ND-CP, and financing coffee replanting in the Central Highlands.
In particular, the government announced Decree 55/2015/ND-CP on June 9, 2015, regarding credit policies for agricultural and rural development. The decree allows businesses to borrow 70-80 percent of funds for their projects and to freeze or clear debts when they face risks due to objective or force majeure reasons. This is considered as a breakthrough in increasing credit flows to rural areas and encouraging businesses to invest and closely work with farmers, said Tran Van Tan.
Also at the conference, JICA Vietnam Deputy Chief Representative Takahashi Akito revealed JICA’s survey of agricultural capital accessibility in Lam Dong Province. Although the province is among the leaders in high-tech agricultural development, its farming has not yet reached its potential due to multiple hurdles in terms of accessing credit which has led to insufficient investment capital.
In this light, Akito underscored that providing preferential capital is not enough and that assistance programs are necessary in order to improve the possibility for farmers to obtain capital.
For this reason, JICA recently proposed a comprehensive assistance program which intends to resolve current problems in terms of agricultural promotion such as non-preferential loan terms, strict requirements in terms o assets as collateral, improved business plans, and initial tremendous investment capital.
According to the program, apart from preferential official development assistance (ODA) capital, JICA will provide technical support for banks to build capacity in examining loan procedures and actively monitoring enterprises’ assets. JICA has proposed to provide 85 percent of the funds and Vietnamese credit institutions to provide the remaining 15 percent.
JICA Chief Representative in Vietnam Mori Mutsuya said that JICA’s program will include groups of measures to increase access to agricultural financial resources. JICA will help farming households, cooperatives and businesses to draw up plans, while at the same time helping credit institutions to build capacity in evaluating mortgaged assets in order for them to mitigate risks and to be ready to lend farmers. “This requires close association between the government, credit institutions and donors like JICA,” Mori Mutsuya said.
More importantly, borrowers will be appraised based on their productivity, product output and the quality of agricultural products. In doing so, JICA’s program intends to facilitate high-tech farming in Vietnam.