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Mekong Delta struggles with agricultural credit

Released at: 16:18, 09/04/2015

Mekong Delta struggles with agricultural credit

Policies relating to the agricultural sector may require some amendments.

by Hoai An

Despite requiring huge sources of credit, agricultural production in the Mekong Delta faces major problems related to loan limits and criteria for evaluating business.

This was the main conclusion to come from “The role of credit in agricultural products export in the Mekong Delta”, a seminar held on April 7 organised by the State Bank of Vietnam (SBV) in Ben Tre.

To February 2015, outstanding credit among the agricultural sector in the region reached VND163 billion ($7.6 million), accounting for 46 per cent of total regional debts and 22 per cent of total agricultural and rural loans.  This funding relates mainly to agricultural commodity exports such as shrimp, fish, rice and coconut. Additionally, it supports the restructuring of agricultural production in the whole region towards more green and sustainable development.

Director of Institute of Financial Strategy and Policy Dr. Vu Nhu Thang said that agricultural credit in the Delta is limited when commercial banks focus on the risks involved. As a result, the number of local enterprises which can't meet funding requirements is high while the maximum loan remains low.

According to a representative of SBV the mobilization of local capital only met 70 per cent of the demand for agriculture and local banks have to find funds from other cities and provinces.

Additionally, investment credit for agricultural and rural sectors contain high risks while the State’s resources to deal with said risks for agriculture is low. Agriculture insurance is still fledgling and not widespread. Therefore, in order to maximize efficiency, credit policy requires new breakthroughs in mechanism and implementation guidelines.

In addition, local banks should improve the quality of customer evaluations to limit their risks, classify customers to apply appropriate policies, better set up management processes and evaluate assets gained from loans in some particular cases.

The SBV also prepared to advise the government to amend Decree No.41/2010/ND-CP to remove the above mentioned obstacles, propose supporting policies for agricultural credit and develop the industry in the context of economic integration.

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