Economy

Lesson 4: Quickly remove 'barriers' regarding capital and business premises

Economic Reporter Group • DNUM_CDZAGZCACE 14:49

Access to credit capital for production development has always been a difficult problem for cooperatives in general and cooperatives operating in the agricultural sector in particular. Many cooperatives have had to establish subsidiaries to operate, borrowing capital outside of credit at high interest rates. In Nghe An, there has been a mechanism to promote credit to support the collective economic sector and cooperatives, but access and disbursement are still limited.

Ky Son is a mountainous district of Nghe An, with ginger trees that have been granted a geographical indication of protection "Ky Son Ginger". This is a native ginger variety, including buffalo horn ginger and de ginger, grown by ethnic minorities at altitudes of 700 m or higher, where there is fog all year round and special soil conditions, the product has superior quality compared to ginger from other places. SinceCooperativeHuong Son agricultural and handicraft service (Muong Xen commune - Ky Son) has come into operation, ginger products of farmers in 11 communes with an area of ​​over 500 hectares have been consumed, a "miracle" in Ky Son.

Mr. Nguyen Van Luan - Chairman of Huong Son Agricultural Service - Small Industry Cooperative, said: Since 2013, the cooperative has mobilized over 20 households to join in the pilot planting of organic ginger on an area of ​​10 hectares. Up to now, the whole district has nearly 500 hectares of ginger concentrated in the communes of Na Ngoi, Dooc May, Tay Son, Nam Can, Huoi Tu, Keng Du, Muong Long. Every year, the cooperative consumes all products, purchasing over 3,000 tons of ginger for the people.

To create stable output, the cooperative has invested in building factories, machinery systems, and preliminary processing to create quality ginger products, researched and expanded domestic product consumption markets and exported to Bangladesh, India, Pakistan, Uzbekistan, and Turkmenistan. The cooperative has also invested in modern machinery for deep processing and diversified ginger products such as ginger essential oil, ginger starch, ginger powder, ginger extract, dried ginger, etc., which are well consumed in the domestic market. Up to now, 3 products, fresh ginger, ginger powder, and ginger essential oil, have been recognized as 3-star OCOP products.

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We have not been able to fully implement our plans in developing ginger consumption, because the cooperative finds it difficult to access preferential loans, and does not have enough land to invest in production and business, so it is very difficult to be granted certificates related to ginger quality, to be able to export to European markets.

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Mr. Nguyen Van Luan - Chairman of Huong Son Agricultural and Handicraft Service Cooperative

Currently, in Nghe An, there are a number of agricultural cooperatives that have been granted Land Use Rights Certificates (hereinafter referred to as red books). However, when using those red books as collateral to borrow capital to develop business and services, they are still rejected by the bank.

Thanh Thuy Forestry and General Service Cooperative (Thanh Chuong) is one of the few cooperatives that has been granted a red book by the State for the land area used to build the cooperative headquarters. This is considered a legal basis for the cooperative to mortgage loans for business purposes. However, when this issue was mentioned, the members of the cooperative's Board of Directors shook their heads. Taking out the cooperative's red book from the drawer, Mr. Nguyen Sy Binh - Chairman of the Board of Directors, Director of the cooperative said: The cooperative was granted a red book by the State since 2017, with an area of ​​over 5,722 m²at the area where the cooperative's headquarters is built. While the cooperative needs capital to invest in production and business, when it brings the red book to mortgage to the bank to borrow capital, the bank does not accept it.

Unable to mortgage a bank loan, the Cooperative Management Board prepared documents and mortgaged the red book to borrow capital from the Cooperative Development Support Fund throughProvincial Cooperative UnionHowever, the repayment plan is very strict. With a loan of 500 million VND, each year the cooperative must pay 100 million VND in principal plus interest. Because it is very difficult to meet this requirement, the cooperative's Board of Directors does not dare to borrow this source of capital. After 7 years of establishment, the cooperative has mobilized capital from its members, invested in leveling the ground, building warehouses, headquarters, nurseries, irrigation systems, land preparation machines, etc. However, up to now, the profit is still not significant, so it does not dare to risk borrowing capital.

At many forums and conferences organized by the Nghe An Province Cooperative Union, many cooperative representatives proposed and recommended how to make the capital to support cooperative development more favorable in disbursement in order to promote the effectiveness of the capital that the province prioritizes. Talking to us (PV), Mr. Nguyen Ba Chau - Chairman of the Provincial Cooperative Union said: The Nghe An Cooperative Development Support Fund has been entrusted by the Provincial People's Committee to the Social Policy Bank, according to which each cooperative is only allowed to borrow a maximum of 500 million VND and is responsible for repaying the debt within 5 years; each year, it must pay the principal of 100 million VND and preferential interest; so many cooperatives do not have the conditions to pay according to regulations.

Ms. Nguyen Thi Thu Thu - Director of the State Bank of Nghe An Branch, said: The credit balance of cooperatives at banks is very small. It is very difficult for cooperatives to borrow capital because most cooperatives do not have collateral, have little equity, and operate on a small scale; basically, the cooperatives that borrow are individual directors or cooperative members. In fact, banks are in need of credit growth, but lending to cooperatives is still difficult, and it is easy to fall into bad debt.

Regarding this issue, at the online workshop on Solutions to remove obstacles in accessing credit capital for the collective economic sector, a representative of Ha Tinh province shared: Up to 80% of cooperatives have to borrow capital on the informal market and "black" credit with high interest rates and short terms. Only about 10% of cooperatives can borrow capital from the Central and local Cooperative Development Support Funds; 0.5% of cooperatives can access loans from credit institutions. While lending conditions are strict, banks are hesitant to lend to cooperatives because of high lending costs, and the number of effectively operating cooperatives only accounts for more than 40%, so in general, the ability of cooperatives to meet the conditions of banks is limited. This is also the common situation in most other localities across the country.

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According to information from the Nghe An Province Cooperative Union, currently only 4.68% of cooperatives in the province have been granted Land Use Rights Certificates. For capital to support cooperative development, Nghe An has so far provided 10 billion VND, with a plan to provide an additional 2.5 billion VND in 2024, but by the end of May 2024, only 5 billion VND had been disbursed.

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Over the years,Nghe Anhas paid much attention to the development of cooperative economy, especially agricultural cooperatives. Along with policies to encourage agricultural and rural development and the attention of local authorities, production and business activities in agriculture in the province have had positive changes. However, the collective economy and cooperatives are still facing many difficulties.

Operating effectively, creating jobs for tens of thousands of rural workers, but up to now, after more than 20 years of operation, having a piece of land to be proactive in production and business is still a distant dream for Thang Loi Bamboo and Rattan Cooperative (Yen Thanh).

It is known that after 2 pieces of land were borrowed and had to be returned when the locality needed to use it, the current land where Thang Loi Bamboo and Rattan Cooperative is "staying" is the 3rd location. For many years, the cooperative has applied to buy or lease for a 50-year term for an area of ​​2,681m2.²The agricultural land of the members agreed to be transferred back to the cooperative, but has not yet been approved.

Without land, Thang Loi Bamboo and Rattan Cooperative cannot expand its production scale and especially does not have a place to invest in a warehouse with full equipment such as a machine shop, drying oven, paint spraying oven... to produce products eligible for direct export. The land is temporarily borrowed, the cooperative's office and warehouse are also built in a patchwork manner. Without land, a year ago, the cooperative had to mobilize land certificates of its members, borrow 500 million VND through the Social Policy Bank to buy machinery and transport vehicles with an interest rate of 0.53% and pay within 5 years.

Hung Tay Agricultural Service Cooperative (Hung Nguyen) is considered an effective service cooperative of the province, providing irrigation services, seeds, fertilizers, garbage collection, mushroom production, and investing in 5 straw collection machines and trucks operating in the fields. The cooperative has more than 100 members, including 7 main members, each assigned to take on a task. However, during the harvest season, after collecting straw in the fields to sell to livestock farms and sell outside the province, the cooperative does not have a warehouse to store dry straw and has to rent it, which is very expensive. Tens of thousands of rolls of straw during the harvest season have to be stored in many places, which is very inconvenient. Currently, Hung Tay Agricultural Service Cooperative wants to rent land to use as a warehouse to store machinery and straw to increase production efficiency and contribute to environmental protection. As for credit loans, the cooperative cannot borrow and has to borrow from individuals outside.

In Thai Hoa town, according to Mr. Chu Anh Tuan - Chairman of the Town People's Committee: Currently, there are 18/23 cooperatives operating in the area, contributing to the creation of agricultural products with high economic value. However, the cooperatives' physical facilities are still poor, most of them have to borrow land from the Commune People's Committee, or use their family's premises as headquarters; not many cooperatives have received support or incentives on land to build headquarters, warehouses, and service business establishments. The products made by cooperatives have not been registered for trademarks or protection rights, some have not been packaged or have their own packaging, the quality is uneven, and they have not reached large markets but are mainly consumed locally. And in general, access to credit capital is still very difficult for cooperatives.

On April 23, 2024, in Hanoi, the State Bank of Vietnam coordinated with the Vietnam Cooperative Alliance to organize a workshop on "Solutions to remove obstacles in accessing credit capital for the collective economic sector". Ms. Cao Xuan Thu Van - President of the Vietnam Cooperative Alliance, said: In fact, the State has paid great attention to the collective economy and cooperatives and has issued many policies to support capital, science and technology, and human resource training in this sector. However, cooperatives still have difficulty accessing loan policies because they must have collateral, while the current mechanism does not allow all cooperatives to have common assets, and regulations on unsecured loans for cooperatives are available but unclear.

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The State has paid great attention to the collective economy and cooperatives and has issued many policies to support capital, science and technology, and human resource training in this area.

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Ms. Cao Xuan Thu Van - President of Vietnam Cooperative Alliance

Ms. Cao Xuan Thu Van also said that in the coming time, the Vietnam Cooperative Alliance will review and specifically evaluate the operational efficiency and governance of cooperative members, hoping to continue to receive attention from the State Bank, investment from commercial banks, hoping that cooperatives operating effectively will be recognized for their strengths in the process of accessing capital sources.

According to Ms. Cao Xuan Thu Van, the 2023 Law on Cooperatives, which was promulgated by the National Assembly on June 20, 2023 and will take effect on July 1, 2024, is expected to be an important milestone in resolving bottlenecks, but not all bottlenecks have been resolved. Based on the actual conditions of the country, the limitations of the 2012 Law on Cooperatives have also been amended, supplemented and clearly demonstrated by the Law, which will create motivation for cooperative groups, cooperatives and cooperative unions to develop rapidly and sustainably in the coming period.

(To be continued)