The Asian Development Bank (ADB) signed financing agreements with eight Vietnamese banks, including the Vietnam Bank for Agriculture and Rural Development (Agribank), aimed at bolstering trade. To know more about how transparent and effective the progress and method of disbursement is, Reporter Nguyet Tham interviewed Mr Nguyen The Binh, President of the Board of Directors of Agribank, on this matter.
Why did ADB choose Agribank as an intermediate lending bank in Vietnam?
Since its inception on March 26, 1988, Agribank has always affirmed its position and prestige of a leading commercial bank - the largest financial institution in Vietnam, played a leading role in investment for the development of agriculture, rural area and national economy. Credits for “three-agriculture group” (which refers to farmers, agriculture and countryside - the three factors connected to agriculture) always accounts for nearly 70 percent of its total outstanding loans. Agribank now has more than 2,300 branches and transaction offices nationwide, and is a trusted partner for over 30,000 businesses, nearly 10 million farming households, and thousands of domestic and foreign partners. A vast business network, a large customer base where most is households in the countryside together with effective implementation and transparent management of investment trust fund are conditions for ADB to choose Agribank as an intermediate lending bank in Vietnam.
How has Agribank done to use ADB’s credits transparently and effectively? Who are priority borrowers at Agribank?
As of 2011, Agribank has carried out seven ADB-funded projects with a total capital of US$92.5 million, including Tea and Fruit Development Project; Rural Development Credit Project; Agricultural Development Programme; Central Region Poverty Reduction Project; Rural Enterprise Finance Project; Quality and Safety Enhancement of Agricultural Products and Biogas Development Project; and Fisheries Infrastructure Rehabilitation Project. These projects have been implemented very effectively. Some of them have finished the disbursement stage and are recovering investment capital.
By the end of the first quarter of 2011, outstanding loans of ADB-funded projects reached VND2,144 billion (approximately US$113 million), with 52,573 loan items. Accrued credits as of the end of the first quarter of 2011 were VND12,972 billion, with 553,088 loan items. Subprojects which receive investment trust funds of ADB are carried out in accordance with provisions on repayment and environmental commitments for each project. Bad debts are kept at as low as 0.67 percent. These projects have created 906,025 new jobs. 51.5 percent of subproject owners are women.
Being fully aware of the importance of ADB-funded projects, Agribank has deployed comprehensive solutions to utilise this source of capital transparently and effectively. Since the stage of start-up, Agribank has made public notice and coordinated with women's associations and farmers associations to introduce and guide every citizen and every household about the projects. During the process of deployment, Agribank periodically examines, supervises and evaluates the projects in order to quickly identify advanced models, good aspects to be promoted and bad sides to be addressed. Besides, Agribank builds a complete documentation system to guide implementation, accounting and itemised provisions for each project to clearly define responsibilities of each unit in the process of appraising and approving loans in accordance with provisions of ADB, the Government of Vietnam and Agribank; builds a complete information technology system to ensure rapid and accurate accounting; establishes and maintains a project turnover fund under the regulations.
Agribank has provided loans to right borrowers as specified by loan agreements. However, there are two groups of priority for ADB-funded projects. The first group is households doing business in relation to agriculture and countryside, farm owners, and households living on traditional industries. The objectives for this group are too boost labour productivity, increase incomes, improve living conditions, and shift production to commercialisation. The second group is small and medium enterprises serving agriculture and rural areas like purchasers of agricultural products, post harvest service providers, traders, processors, exporters and others.
Currently, bad debts or nonperforming loans are existing problems at many banks. Does Agribank have any strategy to reduce this sort of debt?
Agribank concentrates its resources on building centralised, independent and comprehensive risk management system according to international standards to improve credit quality and operational performance to pave the way for sustainable development. Currently, Agribank is carrying out a WB-funded comprehensive risk management project, which also covers credit risks, with the aims of improving risk management apparatuses, standardising risk management personnel to meet Basel risk management requirements, building credit risk management systems, and developing modern systemised credit risk management tools in accordance with international standards.
In the immediate term, Agribank will implement following specific measures: Training and re-training lending processes and procedures for all credit staffs, even those with managing tittles; Focusing on loan appraisal, collateral valuation, cash flow management, loan and loan terms, etc; Minimising insecure loans or loans that use future assets as a security; frequently organise meetings of credit staffs to assess credit quality and adopt timely measures; Authorising branch managers to directly instruct overall inspection, review, review and appraisal of lending situations, loan employment and mortgaged assets of all loans to customers, and build up specific plans for each case when problems occur.
What do you expect at ADB’s concessional credits?
Asian Development Bank is one of the largest ODA providers for Vietnam. In the coming time, we hope that ADB will strengthen financial support for the Vietnamese banking system, guarantee loans to increase the accessibility of companies to loans, support companies to carry out international commercial transactions, help maintain and create jobs for people in Vietnam. Through this cooperation, we hope that ADB will continue supporting Vietnam to quickly solve problems relating growth and inflation and successfully implement the Socio-Economic Development Strategy for the 2011 - 2020 stage.
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