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  Banking Finance

Agribank credit policies to benefit poor

Deputy Prime Minister Vu Khoan has called on the Agribank to link its credit activities with raising high-quality productivity in the agricultural sector.

Addressing a meeting to review the bank’s activities in the 15 years since the government implemented the policy to lend money to households (1991-2005) this week, Khoan said the bank should take the initiative to help farmers, especially with post-harvest processing and consumption.

"The bank’s credit activities should also help in the process of crop restructuring and promoting the development of traditional handicrafts, aqua-culture and art," Khoan said.

These activities would have a direct impact on reducing the number of poor households in rural areas, Khoan added.

The bank’s Director General, Le Van So, said the Agribank has successfully created an institution of integrated strengths that helps boost the economy through its household credit policies

Reviewing the bank’s activities over the past 15 years, So said the bank has given loans totalling VND1.072 trillion (US$67.4 million), of which VND549,000 billion have been granted to households.

The outstanding debt of the more than 9.4 million households that are the bank’s clients (75 per cent of all households nationwide) at present came to more than VND97 trillion, he said.

In 1991, the first year the bank started lending money to households, the average outstanding debt per household was VND500,000. By the end of 2005 the figure has jumped to VND11 million.

According to So, every VND2 million in credit is expected to create one job, so in the past 15 years, the bank has indirectly generated 275 million jobs. This has made a sizable contribution to the national poverty reduction programme.

So said the bank has tried to keep the bad-debt rate below 3 per cent. To help households access credit more easily, So said, "Agribank is submitting a proposal to the State Bank of Viet Nam to raise the grant which requires no collateral to VND20 million from the current VND10 million per household."

Looking analytically at the past 15 years, the bank has experienced many positive changes, the first of which has been its lending policy to stimulate household economies. The name Agribank (the Bank for Agriculture and Rural Development) spells out its primary functions. As a State bank with the assigned mission to provide credit to the country’s primary industries and contribute to rural development, the bank has done its best to enable farmers to develop and improve their production and standard of living, So said.

The bank started to give loans to rural households in June 1991, implementing the Prime Minister’s Instruction 202.

The bank’s former director general, Nguyen Van Giau, was the person who initiated the idea of lending money to farming households without requiring collateral. The decision has been described as a boost to farmers to expand production.

In addition to the advantages, the bank’s running also has some disadvantages. Its credit policy is not strong enough to efficiently serve the national cause of industrialising and modernising agriculture and rural areas. All credit organisations, including the Agribank, have failed up to now to develop appropriate investment models or credit solutions.

To be in a better position to exploit and develop agriculture and rural areas rapidly and sustainably, the Agribank has come up with seven solutions for its credit activities in the five years from 2006-2010.

They are as follows:

First, define the capital needed for agricultural and rural development in each sector and locality. Based on the projected needs, initiate measures to mobilise the money from different resources, including Official Development Assistance, the State budget and foreign investment.

Second, try to come up with solutions to mobilise capital from other credit organisations or even idle money in the community, where mid-term investment credit will be an important factor.

Third, adopt good management practices.

Fourth, put the Government’s policies and decisions to practice in the service of agricultural and rural development.

Fifth, replicate successful ventures and protect the interests of the bank, farmers, business people and scientists.

Sixth, review the nationwide credit models.

And finally, all credit organisations, including the Agribank, have to put their heads together to assess their investment and capital mobilisation activities.

Vietnamnews - (10/04/2006)

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