The FINANCIAL — IFC, a member of the World Bank Group, has developed a toolkit for developing agricultural finance products for Vietnamese financial institutions, in an effort to expand financing to farmers and agricultural firms, spurring additional growth and job creation.
The manual, Agricultural Lending: A How-to Guide, will help lenders design and implement new products by highlighting the key elements of success for financial institutions to expand financial services to farmers. These include understanding the opportunities and risks involved in agricultural lending, explaining how financial institutions can manage and mitigate risk by adjusting their internal processes, and designing adequate lending products and fostering collaboration with other value chain players. The guide also showcases how regional financial institutions have successfully introduced agricultural lending.
While agriculture is the main source of income and employment for up to 70 percent of Vietnam’s population, only 20 percent of the country’s gross domestic product is generated by the agricultural sector. Access to finance is seen as one of the key constraints to realizing the country’s full agriculture potential, as lending to the sector represents just 10 percent of Vietnamese banks’ loan portfolio, according to IFC.
“Agriculture is fundamental to Vietnam’s economy and its future,” said Kyle Kelhofer, IFC Country Manager for Vietnam, Cambodia and Lao PDR. “IFC is working to expand access to finance in the agricultural sector, as long-term and affordable funding will help farmers and agribusinesses raise income, increase employment, and improve export earnings, contributing to Vietnam’s economic growth.”
The toolkit was developed by IFC under its Agricultural Finance and Post‐Harvest Handling Program in Vietnam, funded by the Canada‐Department of Foreign Affairs, Trade and Development. The overall goal of this multi-year program is to improve sustainable rural growth in Vietnam, leading to an increased net income of $36.6 million for farmers by 2019. Specifically on agricultural financing, the program aims to support financial institutions in building capacity in order to expand financing to the agricultural sector, to farmers and value chain players.