— Vietnam News
HANOI: Credit institutions are reluctant to lend to the agricultural sector due to high risks, while the lending interest rate is low, experts say.
According to Tran Viet Truong, chairman of the People’s Committee of Can Tho City, the Mekong Delta region is affected by impacts of climate change, including rising sea levels, saltwater intrusion and floods.
As the agricultural sector faces weather and nature risks, banks are hesitant to support the sector.
In addition, Truong said, the small and fragmented scale of production makes it difficult for credit institutions to control and accurately assess credit risks.
Because their land is typically fragmented and of low value, farmers also find it difficult to gain enough collateral for the banks. Agricultural loans often have higher interest rates than what farmers can afford.
The lack of insurance solutions for agricultural production and natural disaster risks directly affects farmers’ ability to repay debts, which make banks more cautious in providing credit, Truong added.
Banking expert Can Van Luc agreed: “It is difficult to lend to the agricultural sector as it is very risky and lending interest rates are low.”
Luc said that there is no preferential policy on raising capital for the agricultural sector, so credit institutions have to raise capital from commercial capital sources with high interest rates.
There are also many other limitations that have restricted investment in the agricultural sector, Luc added.
Connections between enterprises, farmers and consumers need to be tighter and more sustainable, because at commitments to consume products have not necessarily been kept.
This has affected consumption of agricultural products and created difficulties for banks trying to recover loans, Luc said.
Meanwhile, although agricultural insurance has thus far issued policies and guidelines, its implementation is still slow.
According to Luc, banks do not dare lend to borrowers in the agricultural sector because they lack collateral, or their collateral has issues, like agricultural land having no certificates of ownership, or greenhouses and other technology or equipment with low liquidity.
Due to these hindrances, investment in agriculture and rural areas has remained modest.
Investment capital for agriculture, forestry and fishery increased from about 60 trillion dong in 2011 to 144 trillion dong in 2023. However, the proportion of this sector compared to total social investment decreased, from 5.1% in 2011 to 4.2% in 2023.
By the end of September 2024, the outstanding loans in the Mekong Delta region alone reached 1.18 quadrillion dong, an increase of 8% compared to the end of 2023.
Of this, outstanding loans for the region’s agricultural and rural sectors reached about 643 trillion dong, an increase of 7% compared to 2023, accounting for 54% of outstanding loans in the area.
But agricultural, forestry and fishery enterprises in the Mekong Delta region, including in key industries such as rice, seafood and vegetables, are still facing difficulties in gaining access to capital.
The State Bank of Vietnam (SBV) recently admitted that the results of credit policies to serve agricultural and rural development have not been as expected.
Unsecured loans only accounted for about 20% of outstanding agricultural and rural loans, while outstanding loans for high-tech agriculture have not changed much.
Assets securing loans are low-value agricultural land and construction on this land is slow to be granted ownership certificates and difficult to value, and remains a major obstacle.
To solve these problems, Luc suggested that the state inject some supporting capital into the sector. Agricultural insurance should also be promoted to reduce risks.
In addition, companies and farmers themselves must try to produce as efficiently as possible to repay bank loans, which reduces risk and bad debts. — Viet Nam News/ANN
