Disbursement of 15 billion VND credit package for forestry and aquaculture completed ahead of schedule

In compliance with the Government's directives, the State Bank of Vietnam launched a credit program with a value of 15 trillion Vietnamese dong in July 2023 to support businesses in the manufacturing and processing of forestry and aquaculture products. The program offers preferential interest rates lower than the average lending rate by 1 to 2 percent per year over the same term.

After the credit package was launched, twelve commercial banks, including major banks such as Agribank, BIDV, Vietinbank, etc., registered to participate in the program. Consequently, the credit program had achieved its goal and was fully disbursed by April 2024.

Following its participation in the 15 trillion Vietnamese dong credit package, Agribank promptly disbursed 3 trillion Vietnamese dong as committed. As a result, Agribank completed its disbursement process in just over four months after the program was launched.

Similarly, other banks had also completed their disbursement process ahead of schedule. By April 2024, the credit package was disbursed to over 6,000 customers, which indicates a considerable demand for capital among businesses in the forestry and aquaculture sectors.

According to the State Bank of Vietnam, the deployment of lending programs in combination with credit solutions and interest rate adjustments for the forestry and aquaculture sectors reflects the banking sector's commitment to supporting Vietnamese citizens and businesses in overcoming challenges, stabilizing, and sustaining their operation.

Despite encouraging results from lending programs for the forestry and aquaculture sectors at Agribank and other participating banks, these institutions acknowledge that there are difficulties in putting the agricultural value chain financing model into practice.

Namely, the development of value chains is currently in need of capable businesses to act as the spearhead as well as nucleus in the chain's activities. Furthermore, engagement from relevant sectors is limited in regions without comprehensive policies for the development of value chains.

On the other hand, joint venture contracts are not effectively enforced, and the occurrence of breaches in these contracts by both individuals and intermediary businesses are prevalent. This situation presents significant challenges for banks in effectively monitoring cash flows. The absence of detailed sanctions to regulate relationships and enhance binding obligations, as well as compliance with joint venture contracts between farmers and businesses, results in a lack of legal basis for resolving disputes.

Moreover, there are challenges in the control of disbursement documentation. Namely, local practices primarily involve cash payments without invoice or documentations.

In addition to solutions and policies from the banking sector, coordinated efforts from relevant ministries, sectors, and local governments will be required to promote production and trading activities, support growth drivers, and stimulate aggregate demand.

Additionally, there is a need to enhance corporate financial transparency, thereby allowing banks to access, evaluate, and extend credit to customers and feasible projects with legal sufficiency. Moreover, local departments, committees, sectors, and business associations should continue to support and collaborate with the banking sector in establishing connections between banks and businesses, understanding customer needs, and identifying and resolving obstacles to meet the capital demands of businesses.

Against the backdrop of challenges and difficulties in forestry and aquaculture export markets in 2023, Vietnam's agricultural sector recorded the highest GDP growth rate in recent years of 3.83%. Notably, the export value of aquatic products reached 8.98 billion USD, and the export value of forestry products reached 14.39 billion USD.