Credit for the priority areas: Waiting for a new "breath of air"

Private credit policies for each of the key sectors of the economy are essential. Photo by Nguyen Ha.

Change

During the working session on the hi-tech agriculture project in February, Prime Minister Nguyen Xuan Phuc assigned the State Bank of Vietnam (SBV) to consider directing and encouraging commercial banks to study a credit package of about 100,000 billion VND by mobilizing capital from commercial banks to provide loans to support enterprises, the hi-tech agricultural production projects and clean agricultural products with more preferential conditions than regular loans. The Prime Minister also assigned the State Bank to assume the prime responsibility for studying and revising and supplementing the credit policy in service of agricultural and rural development so as to create an attractive driving force for enterprises investing in agriculture, especially hi-tech agriculture; having the medium-term credit policy for agricultural investment. Because currently, the businesses have to borrow at an interest rate of over 9.5% and not fixed but floating adjustment each month.

This 100 trillion VND credit package can be considered as a new step in providing capital to the economy of the banking system. As before, the SBV only regulates five priority areas: rural agriculture, export, small and medium enterprises, and hi-tech enterprises entitled to preferential loans with lower lending rates than the business sector of about 3-4% per year. Moreover, the State Bank has given priority to social security and living conditions such as social housing loans, most notably the 30 trillion VND credit package just ended last year.

In general, “orienting” the credit in priority areas has always been the prime focus of the Government, but always comes with the requirement to ensure credit quality. However, when many industries and sectors are asked to have their own credit packages, base on development priorities, the banking system must find suitable mechanisms and policies, because the budget cannot be sufficiently provided for the needs of all sectors.

Therefore, before the question of how to mobilize 100,000 billion vnd for this package, at a recent government press conference, a government spokesman said that the SBV will chair, and positively assign the task to the commercial banks to offer credit packages at interest rates lower than the normal interest rate of 0.5-1.5% to facilitate loans for businesses. In particular, this support package will not have to use the State budget to subsidize the same as the 30 trillion VND loan package used to buy social housing before, but with the source of mobilization of commercial banks.

In carrying out the direction of the head of the Government, the SBV has coordinated with the Ministry of Agriculture and Rural Development to draft a guideline for the implementation of measures to administer monetary policy instruments to support credit institutions to lend for agricultural and rural development. The commercial banks have also been offering priority packages, such as Agribank, with a credit package of 50,000 billion VND for "clean agriculture", LienVietPostBank has a 10 trillion VND credit package for hi-tech agriculture.

Waiting for the effect

According to businesses and experts, it is necessary to have a separate credit policy for important sectors of the economy, because each borrower has different characteristics and cannot enjoy the same lending mechanism, since they have various profitable performance.

About the credit package for hi-tech agriculture, according to Dr. Nguyen Do Anh Tuan, Director of the Institute of Policy and Strategy for Agriculture and Rural Development, lending policy needs to be linked to loans, helping businesses and people to get closer to credit. Moreover, the State should promote the commodity trading floor to appraise the lending subjects to be easier and help the bank to be ready to invest in hi-tech agriculture as a form of profitable business rather than investing in the preferential areas but low interest rates.

Along with the mechanism, many companies raise concerns about access to credit, as many banks apply conditions of trust to customers. According to Dr. Nguyen Do Anh Tuan, the source of credit with priority areas still weighed heavily on interest rate support in the form of “ask-give”, not considering the needs of customers. Many regulations on ensuring the capital or professional safety of credit institutions become insufficient or inadequate compared to the requirements of the current financial market.

In addition to the inadequacies mentioned above, the synchronous development of the whole system with credit mechanism is necessary, since if there is capital but no source for production, the enterprises ccould not develop to meet the target. Representatives of a supporting industry expressed their wish that, when borrowing capital, banks and functional agencies should not only carry out only its function to bring money to businesses, but also support such as project appraising, evaluating, guiding the businesses to find the customers, construction site, production equipment etc.

On policy for agriculture, Dr. Nguyen Duc Thanh, director of the Institute for Economic and Policy Research (VEPR), said that the credit policy system should be integrated with other related policy systems such as insurance policy, the capitalization of land, labor, investment etc. For example, with the insurance policy, the credit system needs to integrate with the agricultural insurance policy by considering the insurance value as the collateral assets to be able to borrowing from the banks etc.

It can be seen that the policies set out to develop the economy are extremely important, but the problem is how to make the policy to become effective and substantial. Therefore, the authorities should not only call, set up policies and projects with the “hot” names but find a reasonable implementation plan.