Finance expert Bui Kien Thanh spoke to Nong thon Ngay nay (Countryside Today) newspaper about the problems farmers encounter in getting access to credit through the banking system.
Economically speaking, collateral is the main tool used when asking for credit from commercial banks. Why don't the banks accept pigs or poultry as collateral?
It is natural that banks have to manage their risks – for themselves and their clients (money depositors). In other words, their job is to control their clients' capital to avoid any risk that might occur. By doing so they will receive some benefits from their performance. That's why their refusal to accept pigs, chickens or other animals as collateral is easy to understand. Who will share the risks with them if an outbreak occurs?
But why do banks accept aqua-products like fish and shrimp as collateral?
Aqua-product enterprises use fish and shrimp as collateral only after they are processed and become products. Once they are commodities and covered by insurance companies, they are deemed assets. In such a case, a bank can calculate the risks and agree to lend money to the business.
What can be done to help farmers overcome the current shortage of capital needed to invest in their productions?
In my opinion, there are two options.
Firstly, farmers need to be informed of the Government's agricultural insurance policy. Insurance is considered a condition for farmers looking to access credit, yet this is not enough as agriculture insurance is only part of the package covering risk.
Secondly, local administrations must act as guarantors for the farmers when the latter use pigs, chickens and other poultry as collateral. It means the loan contract must be signed by a bank representative, the farmer (i.e. the borrower) and the local authority. In addition, the bank has to go to the pigsty to check the herd's health.
More recently, farmers in Dong Nai Province, in south Viet Nam have initiated the idea of using their pigs and poultry as collateral. In my opinion, the proposal is unlikely to be accepted by the banks. In reality, delayed payment, debts and even bad debts owed by enterprises and farmers are innumerable. This has made commercial banks reluctant to grant credit to them. In this case, I recommend that farmers seek help from the Viet Nam Bank for Social Policy.
More recently the Government has adopted quite a few policies to help agriculture, farmers and rural development. However, farmers still face many difficulties accessing loans from commercial banks. Why is this?
Yes, the Government has paid special attention to agricultural policies and rural development. This has been highly appreciated as we all know that agricultural exports, including rice and aqua-products, account for a large proportion of the nation's annual export turnover. This is why the Government has ordered the State Bank of Viet Nam (SBV) to lend money to commercial banks at zero interest, which in turn then lend the money to farmers at a low interest rate. However, as far as I know, the relevant authorities have yet to come up with instructions to turn the order into reality.
What's the next step to bring the Government's policy to life?
The banks should change their stance so that farmers can access loans from them. By that I mean the banks' credit staff should not evaluate the borrower from their so do (Red Book – land certificate) or so hong (Pink Book – house certificate) when deciding whether to grant loans or not. Instead, they should analyse farmers' business plans. However, frankly speaking, farmers are now broke due to mortgaging everything they have to find the money to invest in their productions. It is high time the banks change their operational procedures, otherwise bankers and farmers will not be on the same page. — VNS