Credit policies for incentive to the collaborative model for agricultural production in Vietnam

Credit policies for incentive to the collaborative model for agricultural production in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What are credit policies for agricultural and rural development in Vietnam?

Credit policies for agricultural and rural development include several policies or measures that the Government adopts to enable organizations or individuals to have access to loans for agricultural and rural development,

Concurrently encourage credit institutions to provide loans of this kind and make a contribution toward restructuring the agriculture and bringing about rural reforms as well as gradually improve the people's life.

(Clause 3, Article 3 of Decree 55/2015/ND-CP)

2. Credit policies for incentive to the collaborative model for agricultural production in Vietnam

Specifically, in Article 14 of Decree 55/2015/ND-CP (amended in Decree 116/2018/ND-CP), credit policies for incentive to the collaborative model for agricultural production in Vietnam include:

- Enterprises, cooperatives or cooperatives alliances that sign the contract with the entities directly carrying out agricultural production operations for supply or consumption of agricultural commodities shall be entitled to apply for unsecured loans considered by credit institutions at a maximum rate of a loan equal to 70% compared with the value of the project or plan for loans on a collaborative basis.

- Main enterprises, cooperatives or cooperatives alliances (hereinafter referred to as main organization) that sign the contract to execute the project for value chain collaboration on the agricultural production with the entities directly carrying out agricultural production operations shall be entitled to apply for unsecured loans considered by credit institutions at the maximum rate of a loan equal to 80% compared with the value of the project or plan for production and business on a collaborative basis.

- In case the main organization carrying out value chain collaboration is faced with risks incurred due to force majeure, loan debts shall be treated as follows:

+ Credit institutions shall consider whether debt repayments are rescheduled and debt groups are kept unchanged, concurrently decide to provide new loans on the basis of taking into account the feasibility of the production and business project or plan, customers’ debt repayment capability in order to help them to deal with their difficulties, stabilize their production and repay their previous and current debts to credit institutions;

+ After considering the request made by the provincial People’s Committee, the State Bank of Vietnam shall preside over, collaborate with the Ministry of Finance in requesting the Prime Minister to grant the permission for credit institutions to perform the debt charge-off without interest payment for loans provided for the main organization carrying out value chain collaboration within a maximum time period of 03 (two) years, and to agree that groups of debts subject to such charge-off are kept the same as those defined prior to such debt charge-off that occurred. An amount of interest on debts that have been charged off shall be proportionately repaid by the State budget;

+ If measures stipulated at Point a, b Clause 3 of Article 14 of Decree 55/2015/ND-CP have been taken but the main organization carrying out value chain collaboration is still faced with difficulties in debt repayments, the provincial People’s Committee shall send a detailed report to the Prime Minister, the State Bank of Vietnam and the Ministry of Finance.

Based on the report and request submitted by the provincial People’s Committee, the State Bank of Vietnam shall preside over, collaborate with the Ministry of Finance in submitting a final report to request the Prime Minister to consider charging off customers’ debts and distributing funds from the State budget to credit institutions to make up for such debts, depending on the rate of specific losses or damage.

- Management of loans granted under an association contract for agriculture production

+ Management of loans granted under an association contract according to the value chain:

According to the value chain-based association contract between the main organization and participants in the association (hereinafter referred to as "the associated party"), the credit institution shall enter into a loan agreement with the main organization and/or the associated party and manage the loan granted under such association contract adhering to the following principles:

(i) The main organization and associated party shall open an account at the credit institution granting the loan and make a commitment to conduct all currency transactions related to the value chain through this account.

(ii) In case the main organization makes advance payment for production cost of the associated party:

++ The credit institution shall grant a loan to the main organization to pay for supplies purchased, input service provided to the associated-party in advance, products purchased by the associated-party after the advance is deducted, product processing and consuming by the main organization.

++ The credit institution shall collect debts from the main organization according to revenues of from sales under consuming contracts between such organization with consumers and other legal revenues.

(iii) In case the main organization does not make advance payment for production cost of the associated party:

++ The credit institution shall grant a loan to the associated-party to pay for supplies purchased and input services provided for association in production.

++ The credit institution shall collect debts from the associated-party according to its revenues from sales to main organization.

++ The credit institution shall grant a loan to the main organization to pay for product purchased by the associated-party, product processing and consuming by the main organization. Disbursement with the main organization to pay for product purchased by the associated party shall be made in conjunction with debt collection from such associated party.

++ The credit institution shall collect debts from the main organization according to revenues of from sales under consuming contracts between such organization with consumers and other legal revenues.

+ Management of loans granted under an association contract:

(i) In case the parties enter to the association contract to complete one or more than one phase in the value chain collaboration as per provisions in Clause 6 Article 3 of Decree 55/2015/ND-CP, the credit institution shall enter into an agreement with such parties to complete each phase in the value chain collaboration.

(ii) The credit institution and parties of the association contract shall enter into an agreement on repayment term in consistent with time for completing each phase in the value chain collaboration.

The credit institution shall provide intermediary payment service for parties entering into the association contract who open an account at such credit institution at request of such parties.

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