The chain is increasingly tight

According to the Ministry of Agriculture and Rural Development, since the implementation of Decree No. 98/2018/ND-CP (on policies to encourage the development of cooperation and linkage linking production with consumption of agricultural products), the development of linkage models linking production with consumption of agricultural products has been strongly promoted by localities.

Statistics show that by the end of 2023, nearly 2,050 linkage chains had been formed nationwide with the participation of 1,250 agricultural cooperatives. During the years 2018-2023, the central budget allocated about 767 billion VND to support localities in building and operating nearly 1,000 projects and plans to link the development of agricultural raw material areas.

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The Ministry of Agriculture and Rural Development stated that although current production linkage models associated with agricultural product consumption have not been standardized and developed spontaneously, with the participation of more and more large corporations in the agricultural sector, the number of professional closed linkage models is increasing quite rapidly.

Popular in vertical linkage chains in key industries such as rice, seafood (shrimp, pangasius), and vegetables are the "four-house linkages" that are quite tight and well-organized from production, supply of plants and breeds to support of input materials, output consumption, and support of technical production management as well as bank loan guarantees.

According to Mr. Le Thanh Hao Nhien, CFO of Loc Troi Group, the group's current linkage chains are tightly organized in the direction of sharing risks and profits. Farmers and cooperatives participating in the linkages are signed economic contracts and are supported by enterprises to connect with banks to borrow capital to invest in seeds, fertilizers, and pesticides.

“The bank can manage the cash flow of both businesses and farmers in the chain, so it is convenient to lend. Meanwhile, businesses can proactively source raw materials, which will also ensure cash flow,” said Mr. Nhien.

Similarly, Mr. Pham Thai Binh, Chairman of Trung An High-Tech Agriculture Joint Stock Company, said that the active participation of large corporations is creating conditions for the strong development of professional agricultural production models, high-tech applications and field digitalization. Many businesses are willing to invest tens of millions of USD in disease management software, financial management according to the value chain, with detailed records and comparisons. Therefore, it is quite easy to calculate risks and apply measurement and prevention measures. This is also favorable for credit institutions to participate in providing capital.

Credit promotes raw material areas

According to the Ministry of Agriculture and Rural Development, the policy of investing in key agricultural raw material areas associated with sustainable development is currently being strongly promoted by this industry. On a national scale, the Project to build 5 standard agricultural and forestry raw material areas in the period of 2022-2025 has been implemented by 13 localities, calling for large enterprises and economic groups to invest and cooperate for development. The demand for credit capital for localities to form raw material chain models in the years 2024-2025 is estimated at about 552.3 billion VND.

“Currently, the Agribank system and ABIC Insurance Company have committed to deploying capital funding and developing a variety of financial, credit and agricultural insurance products and services for raw material areas. The Ministry of Agriculture and Rural Development encourages all credit institutions to cooperate with localities to complete this project,” said Mr. Le Duc Thinh, Director of the Department of Cooperative Economics (Ministry of Agriculture and Rural Development).

From a local perspective, according to records in some provinces in the Mekong Delta, currently, Agribank branches are preparing to deploy loans for the development of raw material areas through guaranteed credit packages, including: wholesale loans through cooperatives, mortgage loans with production and purchasing linkage contracts between 3 parties (bank - agricultural product purchasing linkage enterprise - cooperative) and mortgage loans for cooperatives with assets formed from loans and contributed capital of cooperatives.

A representative of the Ca Mau Province Shrimp Association said that the locality has currently built about 20 chains linking businesses, cooperatives and shrimp farming households. The links of companies such as Minh Phu Group, Nam Can, Camimex, Tai Kim Anh... have all been funded by credit institutions and have developed payment support services and loan disbursement.

In addition to Agribank, currently, a number of other banks such as NamABank, LPBank, HDBank, MB, SHB... have also implemented credit programs targeting agricultural value chain linkage models. For example, NamABank is lending to seafood product chains with interest rates of 3%/year (for USD) and from 8%/year (for VND). SHB and HDBank provide capital for rice production and processing projects that link production and consumption with farmers that meet green production criteria.

According to representatives of commercial banks, the potential for credit growth in agricultural value chain linkage models in the coming years is quite large. Because currently, many private economic groups have shifted their investment to agriculture and are ready to invest in large, well-organized raw material areas. Meanwhile, collective economic models, cooperatives, and farms also tend to be digitalized, restructured, and more transparent in terms of finance and business plans, creating conditions for banks to easily assess and participate in loan financing and deploy accompanying financial and payment services.