According to the State Bank of Vietnam (SBV), by the end of February 2024, credit to the cooperative economic sector reached VND 6,043 billion, down 1.68% compared to the end of 2023; of which, credit for cooperatives in the agricultural sector reached 2,000 billion VND; loans without collateral for cooperatives and cooperative unions in agriculture, reached 153 billion VND.
Low loan rate
It can be said that to support the development of a collective and cooperative economy, the banking sector has implemented many preferential credit policies according to Government Decree No.55/2015/ND-CP dated June 9, 2015, and Decree No.116/2018/ND-CP dated September 7, 2018. In addition, the Vietnam Bank for Social Policies is also implementing many preferential credit policies from the State, in which cooperatives and cooperative unions receive preferential loans according to Decree No. 28/2022/ND- April 26, 2022, CP, implementing the National Target Programme for socio-economic development in ethnic minority and mountainous areas for the 2021-2030 period.
“Developing collectives and the cooperative economy is a guideline that received attention and support from the Party and State. Therefore, closely following the Party’s resolutions and the State’s laws on the collective economy, the SBV has recently identified the collective economic sector in general and cooperatives in particular, as one of the subjects that received the banking sector’s priority in credit investment and many credit expansion solutions”, affirmed Deputy Director of the Department of Credit for Economic Sectors under the SBV, Pham Thi Thanh Tung.
For example, regarding interest rates, the SBV stipulated ceiling interest rates for short-term loans in VND for priority sectors (agriculture, rural areas, exports, supporting industries, and high technology applications). Production and business sector customers will enjoy lower than normal interest rates (currently 5.5%/year), with transparent and healthy financial situations; in which cooperatives operating in priority areas are considered by credit institutions to apply this priority lending interest rate ceiling. According to a summary of the report, many commercial banks are currently applying lending interest rates for cooperatives, cooperative unions, and cooperative groups, which are 1% to 1.5% lower than for normal production sectors. (currently applying at 4%/year).
However, despite being a priority subject, in reality, this is an area with a relatively small rate of access to loans from the banking system and has tended to decrease in recent years. Data from the SBV showed that in 2020, total outstanding credit for the collective and cooperative economic sector reached VND 7,446 billion, an increase of 11.12% compared to the end of 2019. By 2021, the total outstanding credit debt for this area was only 7,214 billion VND, down 3.12% compared to the end of 2020. In 2022, the total outstanding credit debt was 6,316 billion VND, down 12.45% compared to the end of 2020. By the end of 2021 and by 2023, the total credit balance continued to decrease to VND 6,146 billion, down 2.69% compared to the end of 2022.
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Member of Hong Ha Cooperative in Bang Phuc Commune, Cho Don District, Bac Kan Province checks tea quality. (Photo: An Khanh) |
More pushing-up needed
The reason why credit for the collective and cooperative economic sector is still low has been pointed out by all levels and sectors, and Resolution No. 20 of the Party Central Committee also clearly stated that cooperatives lack financial resources, guaranteed assets, and financial transparency, with inefficient business operations, and weak governance. On the other hand, the pandemic and difficulties of the economy, along with the pressure of fluctuating prices of goods and input materials, have significantly affected cooperatives' investment activities and business results, leading to a decrease in their need for credit loans. The cooperatives' internal capacity and operational efficiency are still weak, the organisational model is loose and inappropriate, and the qualifications of management staff are not good; market issues, scientific and technical applications, and digital transformation in cooperative operations still have many limitations.
In addition, according to feedback from credit institutions, the issue of management mechanism, legality and legal status of cooperative economic organisations, also caused difficulties for credit institutions when determining the responsibilities and obligations of loan debt service for collective economic types. Deputy General Director of Vietnam Cooperative Bank, To Hoai Thanh, said that cooperatives currently have difficulty accessing capital due to their poor financial capacity, while to borrow capital, cooperatives must have their own capital ranging from 20% to 30% of project investment capital. This is a mandatory requirement when borrowing money from banks that many cooperatives cannot meet. Many cooperatives do not have a complete bookkeeping system according to regulations, lack a standard reporting system on their financial situation, and accounting books do not meet clear and transparent requirements. “Those problems make it difficult for banks to evaluate the performance of cooperatives to appraise and decide on lending,” Thanh said.
From the cooperative side, the Chairman of the Board of Directors of Ba Vi Green Farm Investment and Beef Development Cooperative in Hanoi, Ta Viet Hung, shared that because collective economic organisations and cooperatives have a small scale, weak competitiveness and limited ability to mobilise resources from the market to invest in production and business, investing in agricultural production is a high risk, so most cooperatives are limited in accessing loans and do not have assets to mortgage. The cooperative's business plan still lacks feasibility and does not meet the loan conditions set by the bank.
Therefore, Hung proposed a solution that the Government build a specific mechanism to suit each region and different industries throughout the country; at the same time, consider directing the SBV, relevant ministries, branches and commercial banks to reduce unnecessary conditions and procedures when cooperatives need preferential loans and have plans to mortgage assets formed from loan capital; and long loan period to ensure production and business maintenance.
Sharing the same opinion, the Chairman of the Board of Directors and Director of Cong Bang Thuan An Agricultural Cooperative in Dak Nong, Nguyen Huu Ha, also said that currently, strict bank lending regulations make it difficult for the cooperative to access capital. “Our cooperative has a common asset value of more than 10 billion VND but cannot access capital due to complicated and cumbersome procedures,” Ha shared. Therefore, Ha proposed that banks consider reducing administrative procedures for lending, such as asset valuation, flexible disbursement of mobile loans, warehouse reserve loans, and priority lending to cooperatives that are doing business effectively and operating in accordance with the nature of a cooperative.
As for credit institutions, to create conditions for the banking industry to carry out the task of supporting sustainable collective and cooperative economic development, Ms Pham Thi Thanh Tung requested that ministries, branches and localities must quickly submit to competent authorities for promulgation of documents guiding the implementation of the Law on Cooperatives (effective from July 1, 2024), to deploy mechanisms to support collective and cooperative economic development synchronously. At the same time, prioritise, arrange and integrate capital sources, especially capital from the National Target Program for New Rural Construction and the National Target Program for Socio-Economic Development of Ethnic Minority Areas. In addition, implement preferential policies and support cooperatives for minorities and mountainous areas, increase the operational efficiency of cooperative support funds in localities and provide capital support, and loan guarantees for cooperatives.
To improve access to credit capital, cooperatives themselves need to ensure all conditions and requirements of a cooperative organisation (in terms of capital, assets, human resources, production and business plans); ensure proper operation of the cooperative; build and implement effective production and business plans, participate and comply with regulations of the linked production model, financial transparency, cash flow and timely debt repayment, as a basis for credit institutions to lend more favourably.
