Participants agreed that if the agriculture sector continues to remain unattractive to commercial capital sources, it would only receive preferential capital from the Government.

The seminar, held by the Bank for Agriculture and Rural Development (Agribank) and Ford Foundation, also heard from those who cautioned against pouring too much investment into a sector that was still not stable.

They said that while agricultural production was still unstable, as farmers continually change the types of crops they grow, pouring more capital in agriculture may be too risky.

According to Trinh Ngoc Lan, an official of Agribank in Hanoi, by the end of last June, Agribank, people’s credit funds and the Viet Nam Bank for Social Policies (VBSP) loaned farmers, poor households and prioritised families about VND181 trillion (US$1.06 billion).

The State Bank of Viet Nam (SBV) also reported that credit for HCM City and Hanoi accounted for 54 per cent of total loans. Meanwhile, central coastal provinces only received 7 per cent, Tay Nguyen (the Central Highlands) received 3 per cent and the north-western provinces made do with 1 per cent.

Lan said this means most bank loans were geared for the cities.

Tran Van Tan, an official from the Credit Department under SBV, said the growth rate of loans for agriculture and rural areas in the last 10 years was at 22 per cent each year, lower than the growth rate of loans nationwide, which was an average 25 per cent per year.

Participants said financial markets for agriculture still had many shortcomings. According to statistics from the Ministry of Agriculture and Rural Development, on average, each rural resident can only accumulate capital of VND800,000 (US$47) each year, and therefore seriously lack capital for re-investment.

In the first six months this year, Viet Nam’s monetary market was very complicated, with many commercial banks competing to raise their interest rates to lure more clients. This diverted a large amount of capital from financial funds away from serving agriculture.

Another factor was the low effectiveness of production in agriculture and a risky business environment, due to natural calamities and epidemics.

According to the State Bank of Viet Nam, there are many diversified financial sources for rural areas, including Agribank, people’s credit funds and the Viet Nam Bank for Social Policies.

Agribank has supplied loans worth VND225 trillion ($13.4 billion) to farmers, the people’s credit funds have given VND20 trillion, and VBSP has loans worth VND36 trillion.

Experts at the seminar said most capital sources for rural areas included preferential capital from the State, while commercial capital was very limited in rural areas.

Nguyen Son Tuong, from SBV’s Banking Strategy and Development Department said that while the nation integrates into the global economy, farmers would face more difficulties in gearing themselves for the world market. Therefore, they often change crops. This has occurred in the coffee, pepper, rice, fish and shrimp breeding sectors.

"In addition, small-scale cultivation means we don’t benefit from large-size projects," he said.

"For example, during French domination, the country had 2.7 million field lots. Today, the amount of farming land has reduced, although the number of lots has risen to about 3.7 million."

Source: Viet Nam News