Agriculture is considered a key support for maintaining stability and reasonable growth in Vietnam’s economy. To strengthen this role, shortcomings in policies for agricultural and rural development must be addressed.
Over nearly three years of implementing Decree 41/NĐ-CP on policies to promote agricultural and rural development, many households nationwide have borrowed capital to expand production and business. Decree 41, along with other state credit-support policies, has helped transform agricultural and rural production from small-scale, fragmented operations into larger, more concentrated investments.
However, banks report several difficulties in carrying out this Decree.
Current Challenges
First, the funds mobilized from the public and through refinancing loans are mainly short-term, while most borrowers in the agricultural and rural sector need medium- and long-term capital. The cost of agricultural lending operations is typically high, and investments in agriculture and rural areas face unavoidable risks.
Furthermore, lending to household-based economies requires each credit officer to manage and monitor a large number of customers while often lacking deep understanding of agricultural technical and economic standards.
Decree 41 increased access to credit for individuals, households, and cooperatives in rural areas by allowing unsecured loans (without collateral).
Yet the Decree also requires borrowers to submit land-use right certificates (for those already issued certificates) or obtain confirmation from the commune-level People’s Committee that their land has not yet been issued a certificate and is not in dispute.
In practice, this still means individuals, households, and cooperatives in rural areas effectively must borrow with collateral. Even though Decree 41 accepts commune-level confirmation of unregistered land, this does not necessarily make it easier for farmers, because access to unsecured loans depends on how quickly local authorities process those confirmations.
Policy Adjustments Needed
To channel more credit into agricultural production and rural areas, the State Bank of Vietnam should work with relevant ministries and agencies to quickly review and amend shortcomings in Decree 41, ensuring that farmers—from townships and towns to communes upgraded to wards—can all benefit from the policy.
In addition, localities need to accelerate the issuance of land-use right certificates to households and individuals, as these certificates are crucial for farmers to access bank loans.
For banks with large outstanding loans in this sector, the State Bank should consider preferential reserve requirements or allocate part of its refinancing funds to support credit institutions’ agricultural lending.
At the same time, credit institutions and commercial banks should be encouraged to develop new, effective credit products that directly support farmers and agricultural businesses. They should also propose measures to stabilize prices of food, agricultural products, livestock, and aquaculture, thereby ensuring stable production and protecting farmers’ interests.