Tóm tắt Luận án Contribution of bank credit to new rural construction in South Central provinces
THE STATE BANK OF VIETNAM
MINISTRY OF EDUCATION
AND TRAINING
THE BANKING ACADEMY
---------o0o--------
HUYNH THU HIEN
CONTRIBUTION OF BANKING CREDIT TO NEW
RURAL CONSTRUCTION
IN SOUTH CENTRAL PROVINCES
Major: Finance - Banking
ID: 9340201
SUMMARY OF DOCTORAL THESIS IN ECONOMICS
HANOI – 2020
THE THESIS IS COMPLETED AT
THE BANKING ACADEMY
Scientific instructors:
1. Dr. TONG THIEN PHUOC
2. Assoc.Prof.Dr NGUYEN THUY DUONG
Examiner 1: ............................................................
Examiner 2: ............................................................
Ezaminer 3: ............................................................
The thesis is defended in front of the Thesis Council at academy level held at the
Academy of Finance at…… hour........day …. month …. year 2020
The thesis is available at:
- The library of the Academy of Finance
- The National Library of Vietnam
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PREFACE
1. Urgency of the thesis topic
The South Central Coast region consists of 8 provinces from Da Nang to Binh Thuan
with a total natural land area of 4.45 million ha, accounting for 13.2% of the country's total
area. The region has 3.67 million hectares (ha) of agricultural land , accounting for 82 , 47%
of the country’s total agricultural land area. With over 1,300 km of coastline, many seaports,
roads, railways and airways connecting with other regions in the country and internationally
with diverse and abundant land and climate resources, the region hs many favorable
conditions for agricultural development and new rural construction. However, after 10 years
of implementing the National Target Program of Building New Rural Areas, only 378/825
communes, accounting for 45.82%, have been recognized as meeting the new rural standard,
lower than the national standard (50.8%) and only higher than that of the Central Highlands
(37.73%) and the Northern mountainous area (26.45%). The results of the implementation of
the new rural construction program are not the same among the provinces in the region,
although the natural and socio-economic conditions among localities are not too different.
Some provinces have so far only less than 50% of communes reaching new rural standards
(Quang Nam, Quang Ngai, Phu Yen, Khanh Hoa, Ninh Thuan) and the average number of
criteria/commune reaches less than 15 criteria. Many criteria directly related to the life of the
people are still very low, such as income criteria (60.6%), poor households (61.3%),
organization of production (70.3%). Limitations in the new rural construction process of the
region in recent years are maybe tem due to both objective and subjective reasons such as: the
transport infrastructure system is still limited and weak; the ability to organize production of a
part of the population in remote and isolated areas is still lacking; farmers, production
households, enterprises, cooperatives and farms in agricultural and rural areas mainly have
small production scale, little capital, lack of awareness to market economy, low competitiveness,
leading to difficulties and limitations in joint ventures, production and distributions; iIn recent
years, there have been many shortcomings in the poverty reduction policy, leading to
dependence, satisfaction with current life, lack of will to rise out of poverty of a part of the poor;
the efficiency of a number of loans from to the government's economic and credit program in
rural areas is still low; the bank's lending policy has not been closely linked with the local
policies ... These have made local credit institutions hesitant in providing credit in rural markets.
Currently, the outstanding loans for new rural construction are still mainly concentrated in the
Bank for Agriculture and Rural Development (BIDV) and the Vietnam Bank for Social Policies
(VBSP) (accounting for 88.9% of the new rural construction credit balance of the region); this
is one of major reasons why the new rural construction process in this regions has been on par
with many other areas of the country. Therefore, it is an urgent issue to boost bank credit capital
for agricultural and rural development which helps create favourable conditions for people and
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businesses to develop production and raise incomes, becomes the firm stepping stone for
economic development, and contributes to new rural construction in South Central provinces.
Based on that reality, the author chose the following topic for the doctoral thesis:
“Contribution of bank credit to new rural construction in South Central provinces” .
2. Literature review
2.1 In foreign countries
There have been many studies in the world in the field of credit for rural areas,
typically the following studies:
In the study "Prosper or Perish: Credit and Fiscal Systems in Rural China"
published by Ithaca Press University, Lynette Ong (2012) addressed the problems of China's
agricultural credit, pointing to the imbalance between central and grassroots credit systems.
Between 1985 and 2004, the Rural Credit Cooperatives (RCCs) were China's official
banking institutions which mainly served rural people. The lack of alternative savings
institutions and investment channels made RCCs a very popular savings option in rural
China. The function of Chinese agricultural cooperatives were to support credit for
agricultural development of farm households. However, according to national statistics on
the loan portfolio of Chinese agricultural cooperatives, the proportion of loans to farmer
households was much lower than that of rural enterprises. Therefore, it was necessary for
the Chinese government to take active steps to reform its financial and banking system to
ensure the credit and financial system in rural China can prosper.
In the article "Mysteries on India's Agricultural Credit" published by The World Financial
Review, Narayanamoorthy and Alli (2015),examined the natural relationship between rural credit
and agricultural GDP growth and made an assessment of the reality of rural credit in India. Many
farmers taking part in rural credit did not only fail to make profits, but became more difficult due
to incurred additional loan costs because the agricultural credit they received was not used
properly. Through the study, the author proposed three policies that the Government of India
could implement to promote the development of the country's agriculture sector: double the
amount of agricultural loan in 3 consecutive years, implement the hunger eradication and poverty
reduction plan for farmers, and have policies to support interest rates for those who are not subject
to poverty reduction.
The study of Kim Young-Chul (2004) on “Improving the Agricultural Finance System: The
Changing Role of Agricultural Cooperatives in Korea” was pusblished in the Journal of
Agricultural Economics, Konkuk University Seoul, South Korea. Through an assessment of the
reality of Korea's agricultural development, the author provided valuable information on Korea's
efforts and initiatives in improving the agricultural financial system. A series of policies were
introduced to stimulate growth in the agricultural sector in Korea, such as reforms towards a
banking system serving both agricultural and non-agricultural sectors; improvement of
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management efficiency through a credit rating system; strengthening of the credit monitoring
system in which establishing an effective supervisory credit system was considered the most
successful solution. This supervisory credit system is the agricultural cooperative system of Korea.
Published studies focused on analyzing and assessing the reality of rural credit
development in countries around the world. Along with that, the authors also proposed some
policy recommendations for regulatory agencies and recommendations for financial
institutions in the context of strong demand for rural credit development.
2.2. In Vietnam
According to author's research, currently there are not many studies on bank credit
for new rural construction. Notable studies are:
2.2.1. Agricultural , rural, and new rural development
The book titled "New rural construction in Vietnam nowadays: a study on the South
Central Coast" by Pham Di (2016), published at the National Political Publishing House, is
a quite comprehensive document about new rural construction both in terms of theory and
field research in the South Central Coast. However the author's time of research on new
rural construction is according to the Decision No. 800/QD-TTg of June 04, 2010,
approving the national target program on new rural construction during 2010-20200 and
Decision No. 491 / QD-TTg of April 16, 2009 promulgating the national set of criteria for
new rural areas.
The doctoral thesis of Nguyen Van Hung (2015) on "New rural construction in socio-
economic development in Bac Ninh province" was successfully defended at Ho Chi Minh
National Academy of Politics. In this thesis, the author systematized the theoretical basis of
new rural construction in socio-economic development; presented new rural construction
experiences in local socio-economic development in some countries such as China, South
Korea or domestic provinces such as Ninh Binh, Hai Duong, Vinh Phuc to draw lessons for
Bac Ninh province; conducted analysis and evaluation of new rural construction practice in
socio-economic development in Bac Ninh province according to criteria from 2020 to 2015,
clarified the achieved results, limited existence and causes. Based on the combination of
theory and practice, the author proposed basic directions and major solutions to new rural
construction in socio-economic development in Bac Ninh province to 2020. Thus, In the
content of that thesis, the author mainly analyzed the criteria of new rural construction in
socio-economic development of Bac Ninh province in the period of 2010-2015 and
proposed solutions to 2020.
Hoang Tien Cuong (2016) presented the articled titled "Some theoretical issues on
agricultural development and rural economy associated with new rural construction in the
context of accelerating industrialization, modernization and international integration"
published in The National Science Conference on agricultural development and rural
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economy associated with new rural construction in the Central region which was organized
by the Institute of Social Sciences of the Central Region. In that article, the author
systematized some concepts about rural area, agriculture, rural economy, viewpoints and
conditions for implementing the objectives of agricultural and rural development associated
with new rural construction, the Party and the government’s policies, and factors affecting
agricultural development and rural economy associated with new rural construction. At the
same time, the author also provided some new approaches and six experience lessons in
agricultural development and rural economy associated with new rural construction at
grassroots level. That study was carried out on agriculture, rural development, new rural
construction in the Central region with the government’s policies from 2015 and earlier.
In summary, according to the author’s research, so far there are many quiate many
studies on agricultural development, rural development and new rural construction but these
studies were mainly done in the first phase of new rural construction (the 2010 – 2015
period) and were done according to the Decision No. 800/QD-TTg of June 04, 2010,
approving the national target program on new rural construction during 2010-20200 and
Decision No. 491 / QD-TTg promulgating the national set of criteria for new rural areas.
2.2.2. Credit activities for agricultural, rural development and new rural construction
The doctoral thesis on "Credit policies of the Bank for Agriculture and Rural
Development of Vietnam for the development of agricultural and rural economy in the Central
Highlands" of Nguyen Manh Hung (2008) was successfully defended at Banking Academy.
The thesis systematized and developed basic theoretical issues about credit policies of
commercial banks for agricultural and rural economic development in the market economy,
studied the reality of agricultural and rural credit policies of the Bank for Agriculture and Rural
Development (Agribank) in the Central Highlands region in the 2002-2007 period, evaluated
policies through a system of evaluation criteria, and drew advantages, limitations and causes of
limitations. From studying the theoretical research and reality, the author proposed solutions
and recommendations to improve the effectiveness of credit policies for agriculture and rural
development of Vietnam Bank for Agriculture and Rural Development for the Central
Highlands region. Thus, the thesis solved the shortcomings on credit policies for agriculture and
rural development of Agribank in five Central Highlands provinces with the main focus on
capital mobilization and lending activities in the 2002-2007 period.
The doctoral thesis on "Mobilizing and using financial sources for new rural
construction in Thai Binh province" of Nguyen Thi Bich Diep (2017), was successfully
defended at the Academy of Finance. The author studied theoretical issues of mobilization
and use of financial resources for new rural construction, experiences of provinces such as
Nam Dinh, Dong Thap and Hung Yen on mobilization and use of financial resources in new
rural construction and lesson for Thai Binh province. In chapter 2 of that thesis, the author
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analyzed the reality of mobilization and use of each financial resource in new rural
construction in Thai Binh province in the period of 2011-2015 and at the same time
conducted a survey of 482 households in 31 communes of Thai Binh province on methods
of mobilizing, allocating and using financial resources from different areas in new rural
construction. From there, the author summed up and evaluated the achieved results, the
limitations and its causes as a basis for proposing solutions to mobilize and use financial
sources, contributing to accelerate the process of new rural construction. in Thai Binh
province for the period of 2016-2020. In general, the results of that thesis can be used for
reference on the theoretical basis of new rural construction, financial resources mobilized
and used in new rural construction and have practical value on some solutions to increase
mobilization and use of financial resources for new rural construction in a locality, namely
Thai Binh province.
The master’s thesis on "Credit solutions contributing to new rural construction at
Cooperative Bank of Thanh Hoa Province" of Hoang Le Nga (2015) was done at the
Banking Academy. The author systematized some basic theories about new rural and bank
credit. After that, the author then analyzed the reality of bank credit for the new rural
construction model of the Thanh Hoa branch of Cooperative Bank from 2012 to 2014,
assessed the achieved results and limitations to be solved so that credit activities for new
rural model of Cooperative Bank of Thanh Hoa province could become more effective and
safer. Based on results of reality assessment, the author proposed a number of credit
solutions to contribute to building a new rural model at Thanh Hoa Cooperative Bank and at
the same time, presented recommendations to the State agencies, the State Bank,
Cooperative Bank of Vietnam and customers. However, this thesis was only about
analyzing, evaluating and proposing credit solutions that could contribute to new rural
construction in a province, namely Thanh Hoa province, of Thanh Hoa Cooperative Bank,
The proposed solutions were only of micro scale.
A ministerial-level research project on "A study of credit policies and solutions for
rural households in new rural construction" by To Ngoc Hung, (chief editor) (2016), was
successfully defended at the Banking Academy. In this project, the research team
established the theoretical basis of credit for rural households in new rural construction,
international experience on credit policies and solutions for rural households in new rural
areas construction and drew lessons for Vietnam. The authors then conducted a review of
the reality of credit policies and solutions for rural households in new rural construction in
Vietnam using secondary data from BIDV and VBSP during 2010 – 2016. The authors also
studied three quantitative models to identify factors affecting farmers' access to loans,
identified factors affecting the expected loan size of rural households and the impact model
of household credit to income in the new rural construction program. From the results of the
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evaluation, the thesis provided directions and solutions to improve policies and credit
solutions for rural households in new rural construction in Vietnam. That is research topic
of bank credit policies for rural households in new rural construction Vietnam duting the
2010 – 2016 period.
It can be seen that there have been many studies on credit activities for agricultural and
rural development. However studies on contribution of credit activities to new rural
construction are still quite limited and incomprehensive; they mainly focused on specific
subjects such as households or production households, a particular bank, a locality or a
province and the majority of them assessed the reality from 2016 backwards.
2.3. Research gap of the thesis
From an overview of foreign and domestic studies, it can be seen that there are quite
many research works related to bank credit for agricultural and rural development and new
rural construction in the world with different approaches and methods for evaluation and
analysis. However, at present, domestic studies on this issue is still limited and not
comprehensive.
The thesis aims at addressing the following basic research questions::
- What is bank credit for new rural construction and the impact of credit capital on
new rural construction?
- What is the reality of new rural construction and contribution of credit activities to
new rural construction in South Central provinces of Vietnam?
- What solutions and recommendations are required to promote credit activities that
contribute to new rural construction in South Central provinces in the near future?
3. Research objectives
The thesis aims to systematize theoretical basis of bank credit for new rural
construction, analyze and evaluate banking credit activities for new rural construction in the
South Central region; on that basis, the thesis proposes some solutions to promote
contribution of bank credit activities to new rural construction in South Central provinces.
4. Research objects and scope
4.1. Research objects
The thesis focuses on theoretical and practical issues on contribution of bank credit
activities to new rural construction in South Central provinces.
4.2. Research scope
- In terms of content: The author limits the scope of the study to contribution of bank
credit activities to new rural construction in South Central provinces.
- In terms of space: Data for analysis are collected from the branches of BIDV and
VBSP in South Central provinces; these are two credit institutions that mainly implement
credit policies used for agriculture, rural development and new rural construction.
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- About time:
+ The thesis studies and assess reality of credit activities for new rural construction in
South Central provinces during 2014 - 2019.
+ The thesis proposes solutions to improve contribution of bank credit activities to
new rural construction in South Central provinces and recommendations to relevant
agencies until 2025.
5. Research methodologies
Data sources used for the research were collected as secondary data on new rural
construction from 2010 to 2019 from the Coordination Office on New Rural Development
of provinces in the South Central region, the official websites of the Departments of
Agriculture and Development of South Central provinces, reports summarizing 5 years and
10 years of new rural construction of South Central provinces and other regions of the
country from the Central Coordination Office on New Rural Development under the
Ministry Agriculture and Rural Development (MARD), the General Statistics Office Of
Vietnam. The bank credit data were collected from the income statements of the VBSP in
South Central provinces, Agribank Central Office in the period 2014 - 2019, branches of the
State Bank of Vietnam in South Central provinces.
From the collected data, on the basis of dialectical materialism and historical
materialism methods, the following methods are used during the thesis implementation
process:
- Methods of analysis - synthesis: this method is used used throughout the thesis to
systematize, synthesize theory to form the theoretical framework for research issues.
- Descriptive statistical method: this method is used to collect information and data;
summarize, present, calculate and describe different characteristics to generally reflect the
research object.
- Comparison method: this method is used as the basis for analysis and identification
of trends and fluctuations of criteria. The statistics are from secondary data sources and
systemized according to time series, to plan and are used as the basis for comparison and
evaluation.
- Method of expert opinion: Researches carried out in this thesis were consulted by
officials at department, office or industry level who are directly related to directing and
coordinating the National Target Program of Building New Rural Areas, Ministry of
Agriculture and Rural Development (MARD), Coordination Office on New Rural
Development under the MARD, and credit officers of Agribank and VBSP.
- Methods of scientific inheritance: The author presents an overview of scientific
studies related to the thesis topic; these results help the author complete the theoretical basis
and the solutions of the thesis.
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6. New contributions of the thesis
Firstly, the thesis has systematized the theoretical framework on new rural
construction and bank credit for new rural construction.
Secondly, the thesis has summarized studies on bank credit for agricultural and rural
development, new rural construction in some countries in the world such as China, Korea,
India and the experience of two provinces of Nam Dinh and Binh Duong, thereby, thereby
drawing experience lessons for the South Central provinces.
Thirdly, by research methods, the thesis has assessed the reality of new rural
construction in the South Central provinces in the 2014 - 2019 period.
Fourthly, the thesis proposes a number of solutions for banks in general, especially
Agribank and VBSP, to promote contribution of bank credit to new rural construction in
South Central provinces
7. Structure of the thesis
In addition to the preface, conclusion, list of reference materials and appendices, the
thesis consists of 3 chapters
Chapter 1: Theoretical basis of bank credit for new rural construction
Chapter 2: The reality of of bank credit for new rural construction in South Central
provinces
Chapter 3: Solutions to bank credit contribution to construction of new rural areas in
South Central provinces
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CHAPTER 1: THEORETICAL BASIS OF BANK CREDIT FOR NEW RURAL
CONSTRUCTION
1.1. Overview of rural construction
1.1.1. Concept of new rural area
New rural area is a rural area in which the material, cultural and spiritual lives of the
people is constantly improved, gradually reducing the gap between rural and urban areas.
Farmers are trained to adopt advanced technologies, have a strong political stance, and play a
leading role in new rural development.
1.1.2. Concept of new rural construction
Thus, the concept of "new rural construction" “is understood as the development
process from outdated rural areas to rural areas with modern production industry, high
quality and productivity, and, at the same time, the process helps improve people's lives (To
Ngoc Hung, 2016).
1.1.3. Content of new rural construction
New rural construction towards implementation of the Set of National Standards in
Decision No. 1600/QD-TTg dated Aug 2016 of the Prime Minister on approving national
target programme and Decision No.1980/QD-TTg dated Oct 17, 2016 on on promulgation
of national criteria for New Rural area in 2016 - 2020. 19 criteria are promulgated in detail
in the program with contents of (1) New rural construction planning; (2)Socio-economic
infrastructure (3) Economy and organization of production, (4) Culture-society and
environment, (5) Political system.
1.2.Bank credit for new rural construction
1.2.1. Concept and characteristics of bank credit
Concept of bank credit
Based on theories about bank credit for new rural construction presented in previous
studies and the author’s study, th author genelizes the concept of bank credit for new rural
construction as follows:
Bank credit for new rural construction is understood as credit activities of
commercial banks to entities in rural areas, participating in agricultural production activities
with the main of providing capital for farmers to serve production and economic
development, thus contributing to hunger eradication and poverty reduction, increase in
income and completion of new rural construction criteria.
Characteristics of bank credit
Appropriate loan management procedures and processes
Lending period and debt collection plan are associated with agricultural
production and business activities
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The natural environment and prices affect farmers’ income and ability to repay.
High loan costs and great risks
The loan security assets are mainly low-value land use rights or unsecured loans
1.2.2. Bank credit classification
- According to credit terms
- According to customer’s credibility
- According to the purpose of borrowing
- According to lending method
1.2.3. Role of bank credit for new rural construction
- Bank credit is an important financial resource in the new rural construction process
- Bank credit is a tool to finance infrastructure development in rural areas, creating
conditions for each business to adopt new technologies into production and business.
- Bank credit gives people a continuous improvement in education, production, and
economic accounting.
1.2.4. Criteria to evaluate bank credit activities for new rural construction
- Growth in service provision scale and new rural loan income
- Expanding of market share for new rural loans
- Diversity of new rural loan services
- The perfection of service quality
- Risk control in lending for new rural construction
- Criteria from the customer side.
1.3. Influencing factors of bank credit for new rural construction
1.3.1. Factors from supporting agencies and organizations
1.3.2. Factors from bank
1.3.3. Factors from customers
1.4. Experience for bank credit for new rural construction in some foreign countries,
in some typical localties in Vietnam and lessons for South Central provinces
1.4.1. Experience of Chinese
China is considered a large developing agricultural country with more than 720
million people and more than 121 million ha of farmland with a vastly untapped rural
financial market. The Central Bank of China estimates that about two-thirds of the total
farmers lack banking services, although the credit and loans in the China Rural Credit Fund
each year increase by 20%, higher than the national average. To address chronic fiscal
shortages in rural areas, the Government has asked financial institutions such as the
Agricultural Bank of China (ABC), Agricultural Development Bank of China (ADBC),
Rural Credit Cooperative (RCC), Rural Postal Saving (RPS) and china banks to increase
credit loans related to agriculture. In particular, the ADBC is instructed to expand the field
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of agricultural support and increase long-term credit for rural infrastructure construction. In
addition, state-owned commercial banks, such as the Investment and Commercial Bank and
life and property insurance companies in Xinyang and Shanghai, also provide some
financial services to farmers.
1.4.2. Exeperience of Korea
Saemaul Undong" means the community renewal movement, launched by the
President of Korea on April 22, 1970. With drastic policy changes, Korean agriculture has
grown from being small and fragmented with backward production to becoming a modern,
industrialized industry. This process started with agricultural cooperatives and quickly
spread throughout rural areas of Korea. Besides agricultural cooperatives, the Korean
government also focused on developing micro credit institutions, bringing credit closer to
farmers. Micro-credit in Korea is mainly conducted by non-governmental organizations; the
government only plays a leading role in policy making and solutions.
1.4.3. Experience of India
India is also a country with the majority of the population living on agriculture (52%);
therefore, up to now, agriculture is still considered the backbone of the Indian economy. In
order to implement these policies, a secured rural credit institution system is needed.
Currently, rural credit in India is divided into two types: institutional and non-institutional.
Non-institutional sources of credit include money lenders, traders, brokers, friends and
relatives. Commercialization in agriculture has made traders and brokers become big money
lenders in the rural economy with fertilizers and pesticides provided by traders through
credit or deferred payment. Institutional credit is provided by co-operative banks with the
amount of credit available for agriculture tripled between 2005 and 2013, accounting for
about 20% of total credit supply for agriculture in the country. Reserve Bank of India (RBI)
and commercial banks act as the largest institutional funding source for the agricultural
sector in India, accounting for over 65% of total credit flow into the region during the 2005
- 2013.
1.4.4. Experience of Nam Dinh province
Nam Dinh is one of the first two provinces in the country to complete the task of new
rural construction. After 9 years, by the end of July 2019, Nam Dinh province has 100% of
communes and towns, 10/10 districts and cities meeting new rural standards, one year
earlier than the target set in the Resolution of the XIX Provincial Party Committee. This is
thanks to efforts from many parties including the significant contribution of the banking
system. As of early October 2019, outstanding loans for new rural construction in 209
communes of the province reached VND 31,984 billion; non performing loan ratio
accounted for only 0.4% of the total outstanding loans to new rural commune. The number
of outstanding customers was 210,440 (households: 209,568; enterprise 860; cooperative
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12). The average outstanding loan of each new rural commune by October was 153 billion
VND/commune, an increase of 103 billion VND / commune compared to 2011. From the
VBSP loans, in the past 10 years, 67,504 poor households, 45,118 near-poor households,
14,432 households have just escaped from poverty and 221,052 other policy beneficiaries
have had access to loans; this helped 30,106 households escape poverty, 8,662 households
escape near poverty and disburse loans to 52,119 students to continue their studies.
1.4.5. Experience of Binh Duong province
By 2019, Binh Duong is among 8 provinces and cities nationwide that have 100% of
new rural communes. At present, there are 46/46 communes meeting new rural standards, 1
commune meet advanced new rural standards; communes are continuing to invest in
improving the quality of criteria according to the set of criteria for advanced new rural
communes and model new rual communes; 3/7 units of district and towns meet new rural
standards, completing the task of building new rural areas. Thanks to social policy credit
activities, financial supports are provided to more than 119,000 poor households and other
policy beneficiaries, with a total loan of 3,288 billion VND, contributing positively to
helping more than 10,000 households overcome poverty to get rich. More than 5,000 pupils
and students have better studying conditions. More than 39,000 laborers maintain jobs and
new jobs are created. More than 94,000 clean water projects meeting national standards are
built and repaired; capital is disbursed for 103 households to buy or rent social houses. The
achieved results have contributed positively to social security, helping 49 communes in the
province to meet new rural standards, limiting the situation of usury and black credit in the
province.
1.4.6. Experience lessons for South Central provinces
From the experience of other countries in the world, especially in China, Korea and
India which has many socio-economic similarities, especially the contribution of bank credit
in in agricultural and rural development, new rural construction, to Vietnam and the two
provinces of Nam Dinh and Binh Duong (which are the leading provinces in new rural
construction thanks to the contribution of credit capital), the author draw some lessons for
South Central provinces about contribution of bank credit to to new rural construction.
Firstly, the provinces of the South Central region need to develop a diverse rural
financial market with many participants involved in the supply.
Second, it is necessary to diversify investment capital for agriculture and rural areas
Third, it is necessary to diversify loan programs / products to farmers
Fourthly, preferential interest rates for lending in agriculture and rural areas are
required
Fifth, the role of policy credit should continued to be promoted.
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CONCLUSION OF CHAPTER 1
New rural construction requires the mobilization of many resources, of which bank
credit plays an important role, providing capital for people in production and business,
increasing income, reducing poverty and contributing to economic growth, and
implementing social security. Chapter 1 has generalized the basic theoretical issues about
contribution of bank credit to new rural construction, such as: concepts, characteristics,
roles, loan classification, criteria for evaluating lending activities for new rural construction.
Chapter 1 has analyzed factors affecting contributions of bank credit for new rural
construction and studied experience on bank credit for new rural construction of some
countries and typical localities to draw lessons for South Central provinces.
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CHAPTER 2 : THE REALITY OF BANK CREDIT FOR NEW RURAL
CONSTRUCTION IN SOUTH CENTRAL PROVINCES
2.1. Overview of new rural construction of South Central provinces
2.1.1. Socio-economic situation in South Central provinces
2.1.2. Reality of new rural construction in South Central provinces during the period of
2014- 2019
2.2. Reality of contribution of bank credit to new rural construction in South Central
provinces during the period of 2014 - 2019
2.2.1. Reality of credit extension in agriculture and rural fields of credit institutions in
South Central provinces
2.2.2. Reality of contribution of bank credit to new rural construction in South Central
provinces during the period of 2014 – 2019
- Contribution of credit capital to new rural construction in South Central provinces during
2016 – 2019
For South Central provinces, the contribution of credit capital in new rural construction
during the period of 2016-2020 is particularly important. As of 2019, the central source for new
rural construction is VND 104,093.26 billion, accounting for 65.49% of the total mobilized
capital for the implementation of the national target program for new rural construction, higher
than the ratio in Decision No. 1600 by the Prime Minister. This source of credit capital acts as the
leverage and motivation for people in the region to boldly invest in economic development, rising
out of poverty, contributing to raising incomes, creating a new face for rural areas.
Table 2.10: Contribution of credit capital to new rural construction in South Central
provinces during the period of 2016 – 2019
Unit: billion dong, %
South Central
provinces
Credit capital for
new rural
construction
868,21
Total capital for
new rural
consruction
3.691,57
% of credit/total
capital for new
rural construction
23,52
Da Nang
Quang Nam
Quang Ngai
Binh Dinh
Phu Yen
14.357,51
3.080,45
28.130,36
9.320,46
51,04
33,05
44.329,89
8.506,22
53.137,67
17.577,83
12.772,74
2.944,43
83,42
48,39
9.803
76,75
Khanh Hoa
Ninh Thuan
Binh Thuan
Total
1.022,19
34,72
22.125,79
104.093,26
31.350,87
158.925,93
70,57
65,49
Source: : Summary report on 10 years of new rural construction of South Central provinces
15
- Size of bank credit for new rural construction
To analyze the contribution of credit activities to new rural construction in South Central
provinces, the author only uses data of Agribank and VBSP because as of 2019, the credit scale
these two banks is 92,541 billion dongs, accounting for nearly 90% of the outstanding loans for
rural construction in South Central provinces. More than 10% of the remaining debt is dispersed
in various credit institutions such as Lien Viet Bank, BIDV, micro-finance institutions, people's
credit funds, etc.,…
Source: Income statements of the representative office of Agribank in the Central
region and of VBSP branches in Central provinces, plus the author’s calculation
The scale of outstanding loans at VBSP and Agribank increases continuously over
the years, from VND 48,077 billion in 2014 to VND 92,541 billion in 2019, an approximate
increase of 2 times. The scale increased steadily in both banks, of which Agribank had a
faster increase rate than VBSP.
In parallel with the credit balance, the number of customers granted credit in South
Central provinces also increased from 1,007,000 customers in 2014 to 1,441 thousand
customers in 2019. After the implementation of Decree 55/2015 / ND- CP and ND 116 /
ND - CP on credit policies for agricultural and rural development applied to VBSP and
credit policies for households newly escaping poverty of VBSP, the growth rate of the
number of customers granted credit in the field of agriculture, rural areas and new rural
construction continuously increased over the years from 6.82% in 2016 to 7.89% in 2019).
Increasing access of people in the rural area to credit capital from commercial banks has
helped people to have capital to organize. production, improving material, cultural and
spiritual life, contributing to the completion of new rural construction criteria of localities in
the region.
16
Table 2.11: The number of customers granted credit of Agribank and VBSP in South
Central provinces, during the period of 2014 – 2019
Unit: thousand of people, %
Target of number of customers
with outstanding loan
VBSP
2014
2015
2016 2017 2018 2019
669
721
355
787
367
864
375
977 1.104
359 337
339
Agribank
1.007
1.076 1.155 1.240 1.336 1.441
6,82 7,29 7,36 7,74 7,89
Total customers approached
Growth in number of customers
granted credit
Source: Income statements of the representative office of Agribank in the Central
region and of VBSP branches in Central provinces, plus the author’s calculation
-. Structure of bank credit fornew rural construction
a/ Credit structure according to lending purpose
Data in table 2.13 show that credit for new rural construction during the period of 2014 -
2019 mainly focused on production and business loans in rural areas and for consumption,
accounting for over 95%, in which credit for agricultural production accounted for over 60% -
twice as much as consumer credit. Moreover, the outstanding credit balance for production and
business grew continuously from VND 33,555 billion in 2014 (accounting for 69.8%) to VND
97,964 billion in 2019 (accounting for 73.4%). In addition, outstanding loan to rural households
also increased from VND 12,860 billion in 2014 to VND 21,604 billion in 2019. However, the
increase in outstanding loans for consumption was slower than for production and business; the
loan proportion tended to decrease slightly in this period. This shows that subjects in rural areas
paid more attention to using loans for agricultural production and business activities, creating
more positive effect in other activities as well to create income and improve faces of life.
Table 2.13: Credit structure according to borrowing purpose in the VBSP and
Agribank in South Central provinces during the period of 2014 – 2019
Unit: billion, %
2014
2015
O/S
2016
O/S
2017
O/S
2018
O/S
2019
O/S
Borrowing
purpose
O/S
%
%
%
%
%
%
Business,
production
33.555
12.860
1.662
69,8 37.300
26,7 13.516
71,0
25,7
3,2
43.021
14.735
1.969
72,0 53.360
24,7 17.530
73,2 61.971 73,8 67.964
24,0 19.600 23,3 21.604
2,8 2.451 2,9 2.973
100 84.022 100 92.541
73,4
23,3
3,2
Consumption
Other
3,5
1697
3,3
2.024
Total
48.077
100 52.513
100
59.725
100 72.914
100
Source: Income statements of the representative office of Agribank in the Central region
and of VBSP branches in Central provinces, plus the author’s calculation (O/S= outsanding)
17
- For VPSB, the proportion of business loans to consumption fluctuated around 2
times, similar to the trend of the general statistics results of both banks. In the consumer
lending structure of VBSP, the author only introduces two lending activities for
disadvantaged students and loans for clean water & sanitation because these two loans
account for a large proportion in total outstanding loans of the bank and other loans
accounted for a small proportion which the author puts in other lending purposes.
- For Agribank, lending for agricultural production and business accounts for a high
proportion compared to consumer loans and loan for other purposes. The proportion of
business loans is more than 3 times compared to consumer loans and loan for other
activities, accounting for over 70% of the bank's total outstanding loans. Outstanding loans
for production and business grew over the years from 2014 to 2019 and reached over VND
50 trillion in 2019, accounting for 75.2%.
b/ Credit structure according to borrower
Outstanding loans to individuals and households continuously increased over the years from
2014 to 2019. By 2019, the outstanding loans to these borrowers of both banks were 57,329
billion VND, increased by 1.67 times compared to 2014, accounting for 61.95% of the total
outstanding credit for agriculture and rural areas. Outstanding loans for these borrowers increased
steadily over the years from 2014 to 2019. By 2019, outstanding loans reached VND 32,593
billion, accounting for 35.22%, an increase of VND 3,479 billion compared to 2018, nearly 3
times higher than outstanding loans in 2014 (VND 10,957 billion).
Table 2.16: Credit structure according to borrower of Agribank and VBSP in South
Central provinces during the period of 2014 – 2019
Unit: billion VND, %
Borrower
2014
O/S
2015
O/S
2016
O/S
2017
O/S
2018
O/S
2019
O/S %
%
%
%
%
%
34.442 71,64 35.625 67,84 39.156 65,56 46.650 63,98 52.203 62,13 57.329 61,95
Individual,
household
SMEs
10.957 22,79 13.580 25,86 21.269 29,17 22.778 31,24 29.114 34.65 32.593 35,22
2.678 5,57 3.308
6,3
3.148 5,27 3.485 4,78 2.706 3,22 2.619 2,83
Other
Total
48.077 100 52.513 100 59.725 100 72.914 100 84.022 100 92.541 100
Source: Income statements of the representative office of Agribank in the Central region
and of VBSP branches in Central provinces, plus the author’s calculation (O/S= outsanding)
c/ Credit structure according to credit terms
The structure of credit terms for new rural construction in VBSP and Agribank in the
period of 2014 - 2019 shows that the proportion of short-term and medium-term capital was
qite balanced. Accordingly, the medium and long-term loan balance continuously increases
at a higher rate than the short-term loans during the years from 2014 to 2019. However, in
terms of the proportion, medium and long-term loans tend to decrease gradually. By 2019,
18
the proportion of medium and long-term loans was lower than that of short-term loans,
accounting for only 49.1%. This is because the growth rate of medium and long-term loans
was slower than the rate of credit growth in short term (Figure 2.7).
Source: Income statements of the representative office of Agribank in the Central region
and of VBSP branches in Central provinces, plus the author’s calculation
- Credit structure according to lending form
The structure of credit contribution to agricultural and rural production, new rural
construction in the South Central provinces mainly include direct loans and entrusted loans
through social unions in which the whole or only certain steps of the lending process can be
entrusted. For VBSP: it can be seen that the credit extension activity at VBSP is mainly
entrusted loans through socio-political associations, continously accounting for a high
proportion of around 90% in the period of 2014 - 2019 with growth in both in outstanding
loans and the proportion of outstanding loans in entrusted lending activities. The socio-
political organizations mandated by the VBSP to take part in the credit extension process
are the Women's Union, Farmer's Union, Veteran's Union and Youth Union.
At Agribank, the proportion of outstanding loans for direct lending is much higher
than entrusted loans through social unions. Specifically, in the period of 2014 - 2019, the
proportion of direct loans continuously reaches 80% to 90% with outstanding loans of VND
59,698 billion as of 2019. Although the proportion of entrusted loans accounted for a small
proportion, it increased gradually over the years from 2014 to 2019, reaching 7,971 billion
VND in 2019 - an increase of 2.5 times compared to 2014 (3,250 billion VND).
-. Bad debt in credit extension activities for new rural construction
For VBSP: non-performing loan (NPLs) are classified into charge-off debts and
overdue debts. The credit quality of VBSP is quite positive with the ratio of charge-off
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