Lesson 3. Difficulty in accessing loans

(Baonghean) -Capital is a prerequisite for developing farm economy. Creating conditions for farm owners to borrow capital has been affirmed in Resolution 03/2000/ND-CP of the Government with an important new point: "Farm owners are allowed to use assets formed from loan capital to ensure loan regulations at banks". Thus, when being allocated land and forests, farm owners can use red books and even mortgage constructions for loans.

However, in reality, in many localities, the issuance of land and forest use right certificates is still difficult. Ms. Nguyen Thi Nam (Tan Phu commune, Tan Ky district) said: Most of the farms here borrow land from the farm, with a 10-year contract, so they are not granted a "red book". Mr. Nguyen Trong Huong, owner of a 14.5-hectare rubber farm in Nghia Hoan commune, has not been granted a land use right certificate. However, there are also many farm owners like Mr. Nguyen Danh Hien (Thuan Yen hamlet, Nghia Hoan) who have had a red book for a long time but do not want to go to the bank to borrow money because of high interest rates, but try to manage with their own capital. According to Mr. Pham Thanh Tu, Director of Tan Ky Policy Bank Branch: "About 80% of farm owners are self-reliant and do not borrow from banks. In the loan capital combined with the recent 1 billion VND job creation support program, very few farms were able to borrow. The loan amount was up to 100 million VND, but only 2 farm owners borrowed. In fact, many other farm owners also wanted to borrow but it was not in accordance with regulations." In some districts such as Anh Son, Tan Ky, Nghia Dan, Quy Hop... sugarcane farm owners were signed contracts by sugar factories, supported with capital to invest in fertilizers and seeds, so they did not need to go to banks... Thus, in Nghe An, in general, farm owners still rarely borrow from banks. Farm owners in Nghe An commented: It is difficult to borrow capital, each time they borrow is small. Those who do not borrow are either reluctant or afraid of business losses, so they do not invest deeply, do not expand production scale, and hire many workers.

Integrated farm livestock model in Nghia Hoan commune (Tan Ky).

Mr. Tran Van Hung, Head of the Household Economic Planning Department of Nghe An Rural Development Department, said: At the time of preparing the 2007 - 2015 farm economic project, the total investment capital in farms of farm owners in the whole province was 158,775 million VND. Of which, own capital was 106,133 million VND, accounting for nearly 67%. Bank loans and other capital sources were 52,643 million VND. On average, a farm had capital of 104 million VND. The national average at the same time was 189 million VND/farm.

Thus, the investment capital in farm economy in our province is still only approximately half of the average. According to Mr. Nguyen Van Phuong, Deputy Head of Household Economics Department, Nghe An Rural Development Department, the reported data from the districts shows that, at the time of 2010, the average capital was 816 million VND/farm. Specifically, the average capital for each type of business is: crop farm: 60 million VND; livestock: 480 million VND; forestry farm and total investment capital is under 60 million VND.

Investment capital only reflects the scale aspect, while the problem of production and business is essentially economic efficiency. Through surveys and analysis by experts at the Department of Rural Development, at the Provincial Farmers' Association and our research on reality, it shows that: The type of crop farm gives the highest income efficiency (0.6%) per unit of investment capital. The type of livestock farm has more investment capital but lower income (only 0.37%). Recently, due to the avian flu, blue ear pig disease and foot and mouth disease in livestock, the income per investment capital of this type of farm is even lower. Many farms even suffer losses. But many farm owners still pursue opening livestock farms because: all the land has been handed over, many people have long capital, and the State still has priority and significant support (especially farms raising super lean pigs that enjoy project support). Moreover, when unfortunately there is an epidemic in livestock farming that needs to be destroyed, there is still support from the State, the difference with the free market price is not much. Forestry farms are different, the income on the invested capital is the lowest (only 0.31%) but certainly, using few working days. Aquaculture farms require large capital investment, high technology, so the interest rate is also quite good (0.42% on capital). In addition, there are advantages of fast turnover, relatively stable, more proactive product consumption. Finally, there is the mixed farm, low capital investment, low technology requirements, few workers, easy product consumption and good income on capital (reaching 0.56%). Therefore, the mixed farm economic model is also quite popular in our province.

Thus, the efficiency of investment capital in Nghe An farm economy is in the low-average group. The main reason is still the poor fertility of the land, except for the red soil of Phu Quy; Low interest rates are mainly due to the consumption stage: selling at low prices, sluggish sales or due to traders forcing down prices, while the prices of materials and fertilizers are the same as elsewhere in the country. On the other hand, the skills and vision of farm owners are still not high enough to compete and find super-profitable products. Equally important is that capital investment is low, so the technology is not modern, the profit on "living labor" is not much, losing the advantage of cheap labor.

Therefore, the province also needs to speed up the process of issuing red books to farms that have not been issued red books so that they can easily complete loan procedures, and at the same time, advise them to see the benefits of borrowing capital to expand their business so that farm owners who are hesitant to borrow have confidence. On the other hand, it is necessary to improve the skills and economic management capacity of the owners so that they know how to calculate, increase the amount of intelligence in a product unit, in order to increase the efficiency of capital.

Hoang Chinh - Van Truong