Opportunities for cooperatives to access capital

(Baonghean) -With over 800 cooperative unions and over 60,000 members, the annual demand for “capital” of cooperatives in our province is very large. However, due to difficulties in the implementation process, the process of accessing and supporting is still difficult and inadequate. In that context, establishing a cooperative development support fund is a “salvation” for the current period...

Effectiveness of Vinh City Cooperative Development Support Fund

In Vinh City, there are 49 cooperatives established before the 1990s. Most of the cooperatives are small and medium-sized, with low competitiveness, a lack of skilled labor, and business management capacity that does not meet the development requirements of the market economy. Technology, machinery, and equipment are still backward.

Faced with the above reality, the leaders and authorities of Vinh City are very concerned. Retaining or dissolving cooperatives is a difficult problem, because no one can deny the role of cooperatives and their members in the past, especially in the subsidy years and the early years of renovation. But if they are retained, they cannot maintain operations as before, and cannot continue to develop cooperatives in the direction of agricultural cooperatives when agricultural land is increasingly narrowing. In that context, with the goal of "renovating cooperatives", Vinh City has proposed a series of solutions to consolidate, strengthen and develop each cooperative, and build production and business plans. To help cooperatives have capital for production, Vinh City People's Committee has proposed a bold plan, which is to establish a "Cooperative Development Support Fund". When the fund came into operation in October 2008, there were only 9 funds established nationwide and they were all funds under cooperative alliances.

According to the operating regulations of the "Vinh City Cooperative Development Support Fund", the fund was established to provide capital support to cooperatives with feasible investment and development programs and projects.

In addition, the fund will also provide non-refundable support for cooperative organization and innovation activities such as: consulting and guiding the implementation of development projects, expanding production and business of multi-industry rural services and solving jobs for workers whose land has been recovered; developing new product production, innovating technology and techniques, building product brands, improving the competitiveness of goods and products; attracting university and college graduates majoring in economics and engineering to work at cooperatives.

To ensure the fund operates effectively, Vinh City coordinates with the Bank for Social Policies. On that basis, the bank will organize inspections, supervision and appraisal of the effectiveness of the projects. Thanks to the above close monitoring, after 4 years of implementation, more than 7 billion VND has been disbursed to support 12 effective projects, such as the project to invest in intensive industrial shrimp farming for Hung Hoa 2 Agricultural Cooperative, Hung Hoa commune; the project to invest in purchasing new equipment to improve the production capacity, supply and consumption of construction materials of Hung Thuy Cooperative; the project to invest in and upgrade the workshop producing statues, medical plasters and super light plaster powder at Quyet Thang Cooperative... The fund also allocated 63 million VND to support cooperatives to pay salaries for newly graduated students applying to work at cooperatives.

Ms. Ho Thi Tan - President of Quyet Thanh Joint Stock Cooperative, a unit supported by the fund to borrow 750 million VND to invest in buying new equipment to expand the production line of superfine white stone powder and support the salary for student Hoang Dinh Son (graduated from Hanoi University of Business and Technology) to work, said: For cooperatives, it is almost impossible to borrow capital from state-owned banks but only from commercial banks with high interest rates, sometimes up to more than 20%. Through the fund, although the loan amount is not large, but with an interest rate of 0.65%/month (equal to policy beneficiaries), it has really helped the cooperative a lot, helping us overcome the difficult period due to lack of capital like now.

Solving the problem of "thirst" for capital

Only a few cooperatives in our province have been able to borrow capital to invest and develop production. This has been a matter of discussion for many years, when at the same time the State has implemented many open credit policies, or lowered interest rates, but collective economic forms in general and cooperatives in particular still face many difficulties in accessing these capital sources. Even with the regular support sources for the provinces, the allocation has long been uneven among localities, the focal points for receiving and allocating are not unified, and the form of "asking - giving" is still heavily influenced by the form of "requesting - giving".

In our province, the assessment of the effectiveness after 10 years of transformation and development under the 2003 revised Law on Cooperatives also frankly acknowledged: Although the scale of cooperatives has grown to 852 cooperatives and cooperative unions with about 60,000 members, however, newly established cooperatives lack capital or do not have capital to operate. The capital needs for expanding production, business and services of cooperatives can only be met at a very small rate. Currently, each year, the cooperative sector needs 1,000 - 1,300 billion VND, while grassroots credit institutions can only meet 100 - 150 billion VND.



The Provincial Cooperative Union cooperated with Hai Van Cooperative to train brocade weaving for resettled people in Thanh Chuong district.

In order to continue to innovate and develop and improve the efficiency of the collective economy according to the Resolution of the 5th Central Conference (Term IX), in recent times, the Central and the province have also issued many policies to support development. Especially after the Law on Cooperatives 2012 was passed by the 13th National Assembly, it created a new legal framework for the operation of cooperatives in accordance with the cooperative economic nature of the collective economy. In particular, the Law on Cooperatives also stipulates types of cooperatives that are preferential and encouraged in borrowing capital, contributing shares, establishing capital support funds for cooperatives, forming cooperative banks and developing grassroots people's credit funds. On the provincial side, since 2007, the Provincial People's Committee has also assigned the Cooperative Union to develop a project "Establishing a fund to support cooperative development", the purpose of which is to receive charter capital provided by the provincial budget, mobilize other capital sources according to the provisions of law and the fund's charter to serve activities to support the development of cooperatives and cooperative unions in Nghe An province.

Mr. Nguyen Van Hung - Chairman of Nghe An Cooperative Union said: Up to now, 28 cooperative support funds in 28 provinces and cities have been established and operated effectively nationwide. The fund has partly solved capital difficulties, helping cooperatives and cooperative groups develop production and business, create jobs, and increase income for workers. Particularly in Nghe An, although the province has not yet established a fund, the operation of the Cooperative Development Support Fund in Vinh has shown its advantages. Particularly for cooperatives, the need for capital is the greatest need at present and members are counting the days until the fund is officially established.

Since 2007, Nghe An Cooperative Union has spent more than 5 years preparing for the establishment of the Fund. During that time, the difficulties, obstacles, shortcomings, and experiences from the Cooperative Development Support Funds have been collected, analyzed, and considered valuable lessons in the future operation of the fund by the union leaders and departments and branches in the province. In the "ripe" conditions, combined with current practical needs, it is thought that the establishment of the fund is necessary, helping the cooperative union and cooperatives have the conditions to organize, expand production, and create new jobs for thousands of members of the province.

My Ha