Farm productivity down despite increased line of credit

By An Hong   July 13, 2016 | 08:00 pm GMT+7

The government has been asking banks to offer more loans to the agricultural sector to boost productivity, but to no avail.

Official statistics show credit to the Mekong Delta, Vietnam’s largest rice-growing region, rose 3.39 percent to some VND400 trillion ($18 billion) in the first half of this year. The figure accounts for 8.2 percent of the country's total outstanding loans.

Farm credit has grown steadily in recent years, the government’s online news portal cited Cat Quang Duong, deputy head of the Credit Department under the State Bank of Vietnam, as saying at a workshop on Tuesday.

As of the end of last month, 48 percent of outstanding credit in the Mekong Delta had gone on agricultural production, which amounts to VND190 trillion, a 10.1 percent increase from the end of last year.

It also means 22 percent of the total outstanding loans that banks have with the country’s agricultural sector are in the delta’s farms.

However, higher farm credit is not helping needy farmers, according to economist Vo Tri Thanh.

Thanh pointed to the disconnection between credit growth and the agricultural sector’s productivity. Given the steady increase in credit, productivity also should have increased. But that is not the case.

According to estimates, Vietnam’s agricultural production has fallen steadily over the past three years. The agricultural sector even recorded negative growth of 0.7 percent in the first half of this year, said the Ministry of Agriculture and Rural Development, after taking a hit from adverse weather conditions.

A survey of ASEAN countries including Indonesia, Thailand, Malaysia, the Philippines and Vietnam found that when credit grows 1 percent, the average growth of the agriculture sector should be 0.13 percent, said Thanh.

The economist highlighted the survey to show that farm loans might not be reaching the intended beneficiaries, which has resulted in no correlation between credit growth and productivity growth in the agricultural sector.

At the workshop on bank credit to promote the socio-economic development of the Mekong Delta, banks pledged to finance 73 new projects in the region with VND28.5 trillion, but 10 percent of that figure has been allocated to a real estate firm, once again proving the money isn't going to those who need it the most.

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