1. MODEL ON GIVING LOAN FOR FARMERS Vietnam Farmers’ Union - VNFU

2. Brief Information of the organization  Organization: Supporting Funds for Farmers- Vietnam Farmers’ Union  Address: Ton That Thuyet Str., My Dinh 2, Nam Tu Liem, Hanoi, Vietnam.  Date organized: On 26/7/1995, Prime Minister signed a document to establish Supporting Fund for farmers under Vietnam Farmers’ Union with initial capital of VND 40 billion (equal to 1.8 million USD) from the Government.

3. Objectives  Supporting and assisting VNFU members to build and expand the models of economic development forms to reduce poverty; increasing the scale of production and business, develop crafts, develop collective economic forms in rural areas; creating jobs; promoting technology application in agricultural production; exploring potentials of each region to produce commercial agro- products with high quality and efficiency.  Facilitate VNFU to promote dissemination, mobilizing farmers in realizing the socio-economic development program in agriculture and rural areas, generating income for farmers and build strong organization.

4. Principles  Activity of the Fund is non-profit but it need ensure safety, capital development.  Be responsible for the Fund before the law and regulations of financial, credit management of the Government.

5. Creating loan for the Fund:  From the Government.  Mobilizing donation from VNFU staff, members, enterprises, organization in the country and abroad or loan without interest or very low interest.  Receiving the loan from international organizations to help farmers and rural development.  Mobilizing from other loan resources by the legal regulations.

6. Giving loan:  Farmers member households who volunteerly participate in the groups to get loan to develop production, bussiness by the guidance from VNFU at all level. – Cooperation farmers’ groups, agricultural cooperatives who has signed contracts and agreement with Farmers’ Union on supporting farmers, particularly the poor in the fields of production, bussiness, selling products, job creating and income generating for farmers.

7. Fields of giving loan  Production on agricultura, forestry, salt making.  Developing the traditional crafts, small industry in rural areas.  Processing, selling agro-products, forestry products, aquacultural products, salt.  Doing business on products, services on agricultura, forestry, aquaculture, salt making and farmers’ living.

8. Type and period of giving loan  Objective of using the loan.  Cycle of production, business.  Financial capacity of loan borrowers.  Fund ammount/resource of Supporting Fund.

9. Maximum ammount of loan:  For each household: 50 million.  For each Project for group including households : 1.5 billion  For each cooperation group: 200 million  For each cooperative: 500 million.  The supporting Fund will ask the Commune farmers’ Union to give trust colateral and farmers do not have to give colateral  By 30 th June, 2014 total loan of Fund at all level has been 1.601,005 billion VND at all 4 levels.

10. Programs and enterprise/business related services to Members  Type of services or programs support to members’ enterprises: supporting funds for farmer members. - 15 households in Vinh Hau A commune, Hoa Binh, Bac Lieu province, Vietnam: Raising Botanical goat. - Duration: 24 months (6/2014 – 6/2016). - Funds: 450.000.000VND (equal to 20.500USD). - 30.000.000VND/household (equal to 1.400USD/household) - Fee: 0.7%/month equal to 8.4%/year (interest rate of commercial bank: 10 – 11%/year for medium and long term loan). Pay fee: each 1 or 3 month. - The fund will be disbursed in 1 instalment. - Refund: in the end of the loan term.

13. Programs and enterprise/business related services to Members  How the services are extended to members? You can draw the process flow chart for ease understanding. - Now having more 7 households. - Collaborate with other agencies to guide farmers how to use the capital effectively. - Introduce the good seed/breeder to farmers. - 2 days training course on technique on raising and choosing seed/breeder. - Supporting farmers in buying fertilizers, pesticide… with deferred payments. - Monitoring, managing frequently. - Supervise and speed up the payment (principal and fee) on time.

14. Loan process Farmers Commune levelAt province levelAt district level Commune levelAt district levelAt province level Central level 2 3 4 5 6 7 8 1 10 9 11 12 13 1415 1617 Inform the budget Refund principal Decision Fee

15. Programs and enterprise/business related services to Members  What are the criteria or conditions for farmers to avail of those services e.g. fee-based systems: - Farmer member - Having area for raising/farming - Having labor but lack of production capitals. - Using loan with right objectives. - Refund the principal and fee on time mentioned the the Contract.

16. Challenges and issue  Loans is small so it is difficult to extend the production scale.  More households would like to be a member of the group on raising goats.  Unstable price.  In the end of the project, the households will meet the difficulty in funds.  Farmers don’t be taught how to establish, manage the cooperative group/cooperatives.  Meet to difficulties in processing techniques on production; in finding the markets.  Don’t have agriculture insurance when having the risks.

17. Recommendations  Duration: 36 months (now 24 months).  Credit limit: farmer household could loan more money.  Organizing the exchange visits for farmers to sharing and learning experiences in other provinces/countries.  Organizing the training courses on techniques on preventing pestilent insects; resolving the consequences of epidemic diseases/natural calamity…  Capacity building for farmers on using/managing fund effectively.  Training courses on marketing, market negotiation, building the brand name, product certificates…  Training how to establish, manage the cooperative group/cooperatives.  Having the agriculture insurance.