Commercial livestock farming has difficulty accessing medium and long-term loans

(Baonghean) - Commercial livestock farming requires a large initial investment to build barns, buy breeding animals, feed, etc. Therefore, in order for people to have capital, cooperation from commercial banks is needed. However, in reality, most farm owners have difficulty accessing medium and long-term loans, even though they have to mortgage their assets.

Accept short term loans

Ms. Tran Thi Nga in Tan Phu commune, Tan Ky district has been raising pigs for meat since 2009. In 2016, she invested in a new farm with a scale of 900 pigs per litter.

When asked about the source of bank loans, Ms. Nga said: The capital "poured" into the pig farm is not less than 4 billion VND and 60% must be borrowed from the bank. Such an investment is very large for the people, but borrowing from the bank is not easy, even though I have a farm certificate and a red book for residential land.

First, Ms. Nga went to the District Agricultural Bank branch to apply for a loan, but the branch only lent 500 million VND, with a loan term of 1 year. She continued to go to the District Investment and Development Bank to borrow 1.5 billion VND, but the loan term was only 6 months.

Raising livestock on farms requires billions of dong in investment, so people always need bank loans. Photo: Xuan Hoang

According to Ms. Nga, commercial pig farming requires medium and long-term loans because market prices fluctuate erratically. If short-term loans are taken, when pig prices drop as recently as they have, farm owners will lose capital, and where will they get the money to restructure bank contracts? Therefore, banks, especially the Agricultural Bank, which is close to the people, need to have an "open" policy of medium and long-term loans for farm owners.

Mr. Nang Minh and his wife, in Quynh Bang commune (Quynh Luu), invested 4 billion VND in 2015 to build a closed-technology farm for raising foreign pigs. He had to mortgage his property to the Investment and Development Bank of Hoang Mai town to borrow 3.8 billion VND. Because the loan term is within 1 year, every year the couple has to struggle to find money to renew the bank contract. Mr. Nang Minh and his wife hope that the bank will have a policy for medium and long-term loans for livestock customers, creating conditions for livestock farmers to feel secure even when pig prices drop.

Farmers all have some collateral such as a house, a plot of land, a motorbike, but these assets are not worth enough to mortgage billions of dong, even tens of billions of dong to do big business. A livestock farm, not to mention the land, requires at least 2 billion dong in investment. However, to borrow money from the bank, people are falling into a vicious circle; that is, they have to have money to build the farm before they can mortgage the farm for a loan!

Reality does not keep up with policy!

Nghe An province has developed a project to restructure the agricultural sector towards increasing added value and sustainable development, period 2013 - 2020; in which, by 2020, the livestock sector will account for 47.8% of the agricultural sector. The project also sets the goal of developing high-quality pig farming to increase added value, striving for the output of live pigs for slaughter to reach 180,000 tons by 2020; the output of live poultry meat for slaughter to reach 45,000 tons by 2020.

Commercial pig farms require access to medium- and long-term loans. Photo: Xuan Hoang

To facilitate people to invest in livestock production, initial investment capital is required. Therefore, the Government has issued many credit lending policies suitable to reality, the most recent of which is Decree 55/2015/ND-CP on credit policies for rural agricultural development.

The regulations are like that, but in reality, farm owners when borrowing capital from banks encounter many difficulties, due to too many procedures according to the "private" regulations of the bank, making many farm owners frustrated, having to "knock on the door" of many banks to get their needs met, even though the loan term is short-term.

However, the bank also has its own reasons, although it wants to promote lending, it still has to be strict. Mr. Tran Van Duc - Deputy Director of the Nghe An Branch of the Bank for Agriculture and Rural Development said: Implementing Decree 55/2015/ND-CP of the Prime Minister, in the process of investing in farm economic credit in the province, the unit encountered some difficulties and problems: The number of existing farms in the area is quite large but the production scale is small, not meeting the criteria for determining farm economy according to Circular 27/2011/TT-BNNPTNT dated April 13, 2011 of the Ministry of Agriculture and Rural Development, spontaneous livestock farming without a specific farm production process, input costs such as breeding animals, feed often fluctuate, the output market is unstable, there is no connection in the product consumption stage, so traders often force down prices, so the economic efficiency of the project is not high. A part of customers are farm economy, weak financial capacity, not enough equity to participate in the project...

From 2013 to present, the Branch has invested in farm economic credit with the outstanding balance of each year higher than the previous year. By the end of 2016, there were 114 farms borrowing capital, with a total outstanding balance of over 48.5 billion VND, short-term loans of over 20 billion VND. Of which, there were 54 livestock farms, with an amount of over 32 billion VND.

In recent years, the farm economy has actively contributed to promoting the development of agricultural production in the province, aiming to accelerate the transformation of crop and livestock structure; transforming production methods from small-scale, self-sufficient, self-sufficient to large-scale concentrated commodity production linked to the market, creating concentrated production areas, creating a premise for the agricultural processing industry... However, sectors and localities need to coordinate and remove difficulties and obstacles in land procedures and credit policies for the farm economy to develop well.

Xuan Hoang