Capital solutions for agricultural cooperatives

NDO - The Prime Minister has approved a project for the development of 15,000 agricultural cooperatives and cooperative alliances operating effectively by 2020, which is considered an important project to contribute to the successful implementation of the scheme on restructuring agriculture and rural development.

It requires approximately VND21.7 trillion (US$954.8 million) to develop 15,000 effective cooperatives.

However, there remain many bottlenecks which need to be removed to achieve the set objective, including securing capital for the operations of cooperatives. According to preliminary calculations, it requires approximately VND21.7 trillion (US$954.8 million) to develop 15,000 effective cooperatives.

Besides state-funded capital for cooperatives, other financial sources from support funds and the commercial banking system are very low with only 2% out of 20,000 cooperatives nationwide currently having access to bank loans.

The reason for cooperatives' limited access to loans is believed to stem from both sides. Regarding the cooperatives, they are often small-scaled units which lack feasible business projects, corresponding capital, collateral, and others such drawbacks. Meanwhile, the most obvious hindrances on the side of commercial banks is their prejudice against old style cooperatives and a lack of confidence in cooperatives.

In this context, to revive and create a new impetus for agricultural cooperatives, economic experts said that it is necessary to make full use of all resources to attract capital for agricultural cooperatives.

It is also advisable to raise the capacity of cooperatives to access loans while stepping up the creation of new-style cooperative models aligned with the key value chains of the locality and the region.

On the other hand, it is important to take advantage of financial resources from the Central fund for cooperative support and its branches at localities as well as preferential loans from the commercial banking system.

In order to secure bank loans, agricultural cooperatives have to join value chains to get technical and technological support in addition to assistance in procuring fertilizers, breeding stock, and distribution of their products.

Recently, several commercial banks have cooperated with the Vietnam Cooperative Alliance to sign a coordination programme on the establishment of a fund in support of cooperative members. This fund will help farmers to get access to low interest rate loans at an average lending rate of 5-7% per annum.

In addition, banks also pledged to provide farmers with practical support through simplified loan procedures. In some cases, banks do not require land as a security asset but the obligations of farmers to sell their products to processing plants and distributors.

There are certainly differences between the commitments and the practices of production and business. But with such positive signals, it is hopeful that capital will soon be poured into agricultural cooperatives to facilitate them in this transitional period.