Opportunities for cooperatives to access capital

(Baonghean)With over 800 cooperative unions and more than 60,000 members, the annual capital needs of cooperatives in our province are enormous. However, due to obstacles in the implementation process, the procedures for accessing and providing support remain difficult and inadequate. In this context, establishing a fund to support cooperative development is a "lifesaver" for the current period...

Effectiveness of the Vinh City Cooperative Development Support Fund

The entire city of Vinh has 49 cooperatives established before the 1990s. Most of these cooperatives are still small and medium-sized, with low competitiveness, a shortage of skilled labor, business management capabilities that do not meet the requirements of a market economy, and outdated machinery and equipment.

Faced with this reality, the leaders and authorities of Vinh City were extremely concerned. Whether to retain or dissolve the cooperatives was a difficult decision, because no one could deny the role of cooperatives and their members in the past, especially during the subsidy period and the early years of reform. However, retaining them would make it impossible to maintain their previous operations, and it would be unsustainable to continue developing them as agricultural cooperatives when agricultural land is shrinking. In this context, with the goal of "reforming cooperatives," Vinh City proposed a series of solutions to consolidate, strengthen, and develop each cooperative, and to build production and business plans. To help cooperatives obtain production capital, the Vinh City People's Committee proposed a bold plan: establishing the "Cooperative Development Support Fund." At the time the fund began operating in October 2008, only nine such funds had been established nationwide, all of which were under the direct control of cooperative unions.

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 development investment programs and projects.

In addition, the fund will also provide non-refundable support for activities related to the organization and innovation of cooperatives, such as: consulting and guiding the implementation of projects to develop and expand multi-sectoral rural production, business, and service activities, and creating jobs for laborers whose land has been expropriated; developing new products, innovating technology and techniques, building product brands, and enhancing the competitiveness of goods; and attracting graduates from universities and colleges specializing in economics and engineering to work at cooperatives.

To ensure the fund operates effectively, Vinh City collaborates with the Social Policy Bank. Based on this collaboration, the bank conducts inspections, monitoring, and evaluations of the projects' effectiveness. Thanks to this close monitoring, over the past four years, more than 7 billion VND has been disbursed to support 12 successful projects. These include projects such as the investment in intensive industrial shrimp farming for Hung Hoa 2 Agricultural Cooperative in Hung Hoa commune; the investment in new equipment to improve the production, supply, and consumption capacity of construction materials for Hung Thuy Cooperative; and the investment and upgrading of a workshop producing statues, medical plaster, and lightweight gypsum powder at Quyet Thang Cooperative. The fund also allocated 63 million VND to support cooperatives in paying salaries to newly graduated students who apply to work at the cooperatives.

Ms. Ho Thi Tan, Chairwoman of Quyet Thanh Joint Stock Cooperative, which received a 750 million VND loan from the fund to invest in new equipment to expand its production line for ultra-fine white limestone powder and to support the salary of student Hoang Dinh Son (a graduate of Hanoi University of Business and Technology) who came to work there, said: "For cooperatives, it is almost impossible to borrow capital from state-owned banks; we can only borrow from commercial banks with high interest rates, sometimes exceeding 20%. Through the fund, although the loan amount is not large, the interest rate of 0.65%/month (equivalent to that of policy beneficiaries) has truly helped the cooperative a lot, helping us overcome the current difficult period of capital shortage."

Solving the capital shortage problem

Only a small number of cooperatives in our province have been able to borrow capital for investment and production development. This has been a long-standing issue, as the State has implemented many open credit policies and lowered interest rates, yet collective economic forms in general, and cooperatives in particular, still face significant difficulties in accessing these capital sources. Even the regular support funds for provinces have been unevenly distributed across localities, with inconsistent points of contact for receiving and distributing them, still heavily reliant on a "request-and-grant" system.

In our province, an assessment of the effectiveness of the 10-year transformation and development under the amended Cooperative Law of 2003 frankly acknowledges that: Although the scale of cooperatives has grown to 852 cooperatives and cooperative unions with approximately 60,000 members, newly established cooperatives all lack or have no capital to operate. The capital needs for expanding production, business, and services of cooperatives are only met to a very small extent. Currently, the cooperative sector needs 1,000 – 1,300 billion VND annually, while grassroots credit institutions can only provide 100 – 150 billion VND.



The Provincial Cooperative Union, in collaboration with the Hai Van Cooperative, is providing training in brocade weaving for resettled people in Thanh Chuong district.

To continue innovating, developing, and improving the efficiency of the collective economy in accordance with Resolution No. 5 of the 9th Central Committee Conference, the Central Government and the province have issued many policies to support development. Particularly after the 2012 Cooperative Law was passed by the 13th National Assembly, a new legal framework was created for the operation of cooperatives, consistent with the cooperative nature of the collective economy. The Cooperative Law also stipulates preferential treatment and encouragement for various types of cooperatives in terms of borrowing capital, contributing shares, establishing capital support funds for cooperatives, forming cooperative banks, and developing grassroots people's credit funds. On the provincial level, since 2007, the Provincial People's Committee has assigned the Cooperative Union to develop a project on "Establishing a Cooperative Development Support Fund," with the aim of receiving charter capital from the provincial budget and mobilizing other capital sources as stipulated by law and the fund's charter to support the development of cooperatives and cooperative unions in Nghe An province.

Mr. Nguyen Van Hung, Chairman of the Nghe An Cooperative Union, stated: To date, 28 cooperative support funds have been established and are operating effectively across 28 provinces and cities nationwide. These funds have partially addressed capital difficulties, helping cooperatives and cooperative groups develop production and business, create jobs, and increase income for workers. In Nghe An, although the province has not yet established its own fund, the operation of the Cooperative Development Support Fund in Vinh has demonstrated its advantages. For cooperatives, the greatest need is currently capital, and members are eagerly awaiting the official establishment of the fund.

Since 2007, the Nghe An Cooperative Union has spent over five years preparing for the establishment of the Fund. During that time, the difficulties, obstacles, shortcomings, and experiences from previous Cooperative Development Support Funds have been compiled, analyzed, and considered valuable lessons for the future management of the fund. Given the "ripe" conditions and current practical needs, establishing the fund is deemed necessary to help cooperative unions and cooperatives organize and expand production, creating new jobs for thousands of members in the province.

My Ha