Summary of Doctoral dissertation in Economics: Bank credit for pangasius value chain in Vietnam

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

BANKING ACADEMY OF VIETNAM
----------------oOo--------------

DANG HOAI LINH

BANK CREDIT FOR PANGASIUS VALUE CHAIN
IN VIETNAM

Major:

Finance - Banking

Code:

9.34.02.01

SUMMARY OF DOCTORAL DISSERTATION
IN ECONOMICS

HA NOI – 2019


THE DISSERTATION WAS COMPLETED AT
BANKING ACADEMY OF VIETNAM

Academic Supervisors:
1. Assoc. Prof., Dr. LE VAN LUYEN
2. Dr. NGUYEN TIEN DONG

Referee 1:
Referee 2:
Referee 3:

The dissertation is defended against University-level Examination Board
at Banking Academy of Vietnam
Time: ………… date …… month …… year 2019

The dissertation could be found at:
- Library of Banking Academy of Vietnam
- National Library of Vietnam


1

INTRODUCTION
1. Significance of the research
In the context of complicated climate change, increasingly scarce resources for
growth and great competitive pressure from international integration, to achieve the set
objectives, the construction of the closed agricultural value chain from the stages of input,
production and processing to distribution and consumption is necessary. Several policies of
the Communist Party and the Government have been issued to support the operation of the
agricultural value chain, including many policies related to capital support.
After more than 3 years of implementing agricultural value chain financing,
compared to rural and agricultural finance, the volume of loan disbursement for the
agricultural value chain is still limited, accounting for a small proportion, ranging from
0.18% to 0.78% in the period from 2014 to 8/2018. Obviously, the above rate is low, the
loan capital has not been effective in agricultural value chain investment. Due to the
broad research scope of agricultural value chain bank loans, pangasius, a key agricultural
product in Vietnam shall be chosen to study.

From the aforementioned reasons, doctoral dissertation entitled "Bank credit for
pangasius value chain in Vietnam" has been chosen.
2.Research overview
2.1. International researches
All over the world, there are several finance-related studies concerning
agricultural value chain which are classified into two research trends as follows:
Typical researches on models, characteristics, structure, management methods and
relationships among members of the agricultural value chain include the studies of Miller
and Jones (2010); Christen and Anderson (2013); Rubeena (2013) and so on. The success
of these studies is to systematize the theoretical ideas related to the agricultural value
chain financing, with a detailed analysis of the model structure of the agricultural value
chain, characteristics of value chain finance, implementation process, risks and measures
to reduce them. This group of authors also emphasized the role of management and made
some recommendations.
The research trend focuses on clarifying the role and efficiency of bank loans
as a source of capital in the agricultural value chain associated with specific contexts.
In general, most research results have confirmed the importance of bank capital in the
agricultural production value chain and the need to develop this lending activity.
2.2. Researches in the country
Scientific researches on this matter in Vietnam still fall behind in comparison to the
worldwide trend, including the research of Nguyen Van Phan, Nguyen Khac Minh and Le
Phan Thanh Hoa (2017) about the role of bank finance in developing agricultural value


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chains in Vietnam; the author group of Pham Xuan Hoe and Nguyen Thi Minh Hang (2014)
on a guide to providing value chain loans; the scientific article by Nguyen Tien Dong (2015)
on solutions for value chain development and high-tech application in agricultural production
and several other studies by authors Quang Canh (2014), Ha Quang Trung (2014), To Ngoc

Hung (2015), Le Van Luyen and Dang Hoai Linh (2015), to name but a few. The success of
these studies is to analyze the situation of implementation and propose solutions that are
appropriate to the Vietnamese agricultural value chain from 2014 to the present. However,
the assessment of factors affecting the bank finance in the agricultural value chain in
Vietnam is relatively small although this issue plays an important role in the sustainable
development of Vietnamese agricultural value chain.
3. Objectives of the research
- To clarify the theoretical framework for the relationship between ownership
structure and performance of the banking system.
- To analyze the current status of ownership in relation to the level of effectiveness
of the commercial banking system in Vietnam.
- To measure the impact of ownership ratios and the quality of corporate
governance on the performance of the bank using econometric models.
- To make recommendations on ownership structure to improve the performance
of Vietnnamese commercial banks.
4. Subjects and scope of the research
The subject of research: Theoretical issues, practical deployment, and factors
affecting the development of pangasius value chain finance at commercial banks.
- Scope of research in terms of space: Financing the pangasius value chain in An
Giang, Dong Thap and Can Tho.
- Scope of research in terms of time: from 2014 to 2018.
5. Chapter Layout of Dissertation
In addition to the introduction, conclusions, references, and appendices, the thesis
has 4 chapters:
Chapter 1: Literature review for bank financing for the agricultural value chain
Chapter 2: Research methods of the thesis
Chapter 3: The current situation of bank credit activities for Vietnam pangasius
value chain.
Chapter 4: Solutions to develop bank lending services for Vietnam pangasius
value chain

6. New contributions of the thesis
6.1. In terms of academic
- The research outcome will provide readers with a basic theoretical framework for
Vietnamese agricultural value chain finance.


3

- Based on the evaluation results, the thesis provides an overview of the
implementation of the Vietnamese pangasius value chain finance for the period of 2014 2018 which is not effective and commensurate with the scale of the Vietnamese
pangasius industry.
- The thesis is an applied research project to carry out surveys, collect data and
verify via SEM model and evaluate factors affecting the deployment of banking finance
in the value chain of Vietnamese pangasius industry.
- Proposing a set of solutions for commercial banks and a set of proposals for
Ministries, Departments, Industries and SBV to aim at the sustainable development of
pangasius value chain finance.
6.2. In terms of practicality
The thesis is a research project that helps scientists, managers, and commercial banks
have an overview of the Vietnamese pangasius value chain finance using measurement and
evaluation methods based on the inspection process. At the same time, it identifies
influential factors when implementing pangasius value chain finance. This is a condition to
deploy applied research and appropriate solutions to enhance the pangasius value chain
finance in the coming time. This is an important and practical contribution of the thesis.
CHAPTER 1
LITERATURE REVIEW ON BANK CREDIT FOR AGRICULTURAL VALUE
CHAIN
1.1. LITERATURE REVIEW ON BANK CREDIT FOR AGRICULTURAL VALUE
CHAIN
1.1.1. The definition of the agricultural value chain

Currently, there is no consistent definition of the agricultural value chain.
Agricultural value chain studies use the term "value chain" or "supply chain" to describe
agricultural value chains. FAO (2010) defines: “The agricultural value chain consists of
a set of agents and activities that take an agricultural product from production to the end
consumer, whereby the value of the product is increased in each intermediate stage. A
value chain can be a vertical link or a network of independent agents on the stages of
processing, packaging, storage, transport, and distribution.
Most subjects in the agricultural value chain are small producers. The relationship between
buyers and sellers in agriculture includes: Instantaneous - sellers directly provide their
products to buyers at unstable selling prices; Seasonal sales contracts - This is a contract of
agricultural products signed in each period; Long-term buying and selling - This is a longterm non-contractual trading relationship, based on mutual trust and belief; The buyer
contributes capital in the production activities of the seller; The company operates all stages
in the value chain vertically without purchasing goods from any buyer.


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1.1.2. Subjects participating in the agricultural value chain
Key actors in the agricultural value chain include Input suppliers; Farming unit;
Collection unit; Processing/processing unit; Distribution unit; Value chain support and
promotion unit.
1.1.3. Characteristics of the agricultural value chain
The value chain has five basic characteristics: The value chain is affected by the
characteristics of agricultural products; Seed production and farming play a key role in
the chain with the participation of farmer households, cooperatives and companies; The
price of agricultural products is more stable in the value chain; Based on the target
customers, the value chain is distributed according to four channels; Food safety is a
decisive factor for the operation and survival of the agricultural value chain.
1.1.4. The purpose of the agricultural value chain
- Limit the complexity of the exchange process;

- Stabilize product quality and establish the status;
- Improving professional, technological and competitive qualifications.
1.2. BANK FINANCING FOR THE AGRICULTURAL VALUE CHAIN
1.2.1. The definition of bank financing and bank financing for the agricultural
value chain
1.2.1.1. Bank financing
Financing is a mutual loan relationship based on trust and that capital will be returned
on a certain day in the future. It can be said that credit is the transfer of a value amount
from one person to another to own it and after a certain time is recovered with a value
greater than the original value.
1.2.1.2. Bank financing for the agricultural value chain
Agricultural value chain credit is a form of transferring the right to use a value amount
from the lender which is the bank to one or more entities using capital who are members of the
agricultural value chain for the purposes in line with the borrowers’ production and business
activities in the value chain in a certain time.
A value chain of agricultural products includes the following five basic stages: raw
material supply, farming, purchasing, processing/production and distribution.
To meet diverse financial needs, there are two forms of credit financing:


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- Credit financing from within the value chain: This is a form of financing between an
entity in the value chain together
.- Credit financing outside the value chain: This is a form of financial support for actors in
the value chain from units outside the value chain, including government, credit funds, banks ...
In this thesis, the credit source that the author mentioned is the credit source from the
bank. Bank credit in the value chain for the agricultural sector is understood as a credit
in the agricultural value chain.
1.2.1.3. Conditions for credit deployment in the agricultural value chain

- Oriented development;
- Understanding the value chain;
- Subjects represented in the value chain.
1.2.2. Characteristics of BANK CREDIT FOR THE AGRICULTURAL VALUE
CHAIN
1.2.2.1. The rotation of credit capital
Debt collection source of the previous stage is the disbursement source of the
following stage. The bank only actually collects its investment capital when it acquires
customer loans at the final stage of the value chain of the agricultural sector invested.
Therefore, the credit source of the bank is circulated faster in the agricultural value chain.
1.2.2.2. The allocation of credit capital
The natural allocation area of agricultural products is often concentrated in some
areas with natural conditions and climate suitable for farming. Therefore, credit capital
in the agricultural value chain is often concentrated in some areas.
1.2.2.3. Appraisal work
Credit in the agricultural value chain focuses on the entire chain. Lending and
lending decisions are based on criteria such as the flow of assets, execution capacity, risk
management, chain competitiveness and the quality of interactions and interdependencies
between cities. chain members, not just based on the ability and financial ability of an
independent customer.
1.2.2.4. Loan products
In this thesis, credit products according to the agricultural value chain include loan
provision, credit limit, and installment loan.


6

1.2.2.5. 1.2.2.5. Disbursement and debt collection are seasonal
The disbursement and determination of debt repayment schedule of customers in
credit activities according to the agricultural value chain based on the completion and

circulation timeline of each stage in the chain.
1.2.2.6. Credit risk
Credit risk by value chain is a potential loss when a bank grants credit to a customer
in the value chain.
In credit activities according to the agricultural value chain, the causes of credit risk
include Risks outside the agricultural value chain; Risks within the agricultural value
chain; Risks from agricultural value chain support units.
Criteria for reflecting credit risk in the agricultural value chain and solutions include
Production activities of the value chain; Liquidity of sales contracts; Financial situation
of entities in the value chain; The volatility of agricultural product prices; Climate change;
Policies and guidelines of the Government.
1.2.3. Subjects participating in agricultural value chain credit
Two subjects involved in credit in the agricultural value chain include borrowers
and lenders.
1.2.3.1. Lenders
- Financial institutions.
- Credit providers in the process of selling products and services (Input suppliers,
equipment suppliers, service providers ...).
1.2.3.2. Borrowers
Borrowers include Research and support centers, professional associations, state
management agencies; Units supplying materials for production; Production unit;
Purchasing unit; Processing unit; Distribution unit.
1.2.4. Credit deployment process according to the agricultural value chain of the bank

Credit deployment steps in the agricultural value chain include value chain analysis;
financial assessment; value chain evaluation. Applying the above research results, the
author performs the analysis of the credit organization process according to the
agricultural value chain as follows:

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a. Before lending: Analyzing the value chain’s characteristics; Evaluating the
development potential of the value chain; Determining the role of credit capital for the
value chain; Identifying the risks while lending.
b. While lending: Receiving loan documents; Appraising; Lending.
c. After lending: Monitoring loans, supporting customers; Monitoring and urging the
collection of loan debt.
1.2.5. Factors affecting the implementation of bank credit in the agricultural value
chain
Inheriting the Belassi and Tukel research model (1996), the author analyzes the
factors affecting credit deployment in the agricultural value chain as follows:
Development capacity; Profitability.
1.2.5.1. Group of internal factors within the bank
- Benefits of agricultural value chain credit for banks;
- The tangibility of the bank.
1.2.5.2. Group of factors outside the bank
- Liquidity of receivables in the value chain;
- Operational risks of the value chain;
- Operational advantages of the value chain ;
- The capacity for joining the global value chain of the agricultural industry;
- Macroeconomic environment;
-The operation of non-credit support units.
1.2.6. The set of criteria to evaluate the results of bank credit deployment according
to the agricultural value chain
The results of credit deployment in the agricultural value chain are reflected in the
following criteria: Customer growth rate; The ratio of agricultural value chain credit
disbursement turnover compared to the agricultural and rural credit disbursement
turnover; the Growth rate of outstanding loans; Rate of interest collection; Overdue debt
ratio; Bad debt ratio.

1.2.7. The basic difference between bank credit model for value chain and
traditional bank credit model


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Based on the characteristics of agricultural value chain credit, the author compares
the difference between this lending model and the traditional credit model, specified in
table 1.1.
Table 1.1: Table 1.1: Differences between agricultural value chain credit and
traditional credit in the agricultural sector
Criteria

Bank credit for the
agricultural value chain

Traditional credit

Proximity to Customers are in the vicinity of Customers can be far away
the bank for convenient
customers
monitoring
Character

-The customer's credit is
reflected
in
the
timely
+ The credit history of

performance of obligations to
independent units in the value
the bank
chain
+ Individual approach
+ How long has this value chain
+ How long does it take for each
existed?
individual to work with the
+ How stable is this value
bank?
chain? How long have the
+ How well does the account
parties worked together?
work?
+ How strong is the relationship
+ Have all previous obligations
between the parties?
been performed?
+ How many parties are the
risks related to and how to deal + Are there commercial and
with risks related to several business reference information
parties?
available?
- The credit of value chain

+ Are the parties in this value + Is there a report of the credit
chain customers of the bank?
management agency?
Capacity

Cash flow in the value chain

Ability to repay the loan

Capital

Capitalization of the value chain

Own capital of customers


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Bank credit for the
agricultural value chain

Traditional credit

Collateral

Cash flow and goods can be
estimated from the operation
history or the previous contracts
can replace or strengthen
collaterals

Assets provided to lender to
ensure the loans or other credit
flows, to reduce the risks for the

bank

Conditions

The strategic relationship among
the parties inside the value chain
supports decision-making and
secures better principles

Reviewing and making a
reasonable
and
favorable
decision after determining credit
information. Credit information
is provided with the expectation
that credit terms will be met.

Technical
knowledge

Having
firm
technical Limited technical knowledge
knowledge, ensuring support for
customers during the production
process

Loan
repayment

The loan is complete when The loan is complete when
customers in the value chain pay customers pay fully the master
fully master debt and interest of it debt and interest of it.

Criteria

Source: Author synthesizes (2017)(2017)

CHAPTER 2: RESEARCH METHODS OF THE THESIS
2.1. METHODOLOGY OF RESEARCH
Research methodology is the process, principle, and approach to solving problems
(Saunders et al., 2009). Some of the research methodology used by the fellows are as
follows:
2.1.1. Research philosophy
The research philosophy includes research assumptions about how the researcher sees the
world. In this thesis, the research philosophy of the fellows is the philosophy of balancing
the interpretation and positivism, in particular: the theoretical model is built based on the


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overview of research and research hypothesis; Based on the actual investigation, the
fellow performs hypothesis testing. Since then, the fellows have developed new
conclusions based on research results.
2.1.2. Research approach
Based on the above theory, this thesis uses the method of interpretation. The
identification of research models and hypotheses stems from the study of credit theory
according to the pangasius catfish value chain. By the survey method, the researcher
verifies the hypotheses stated and draws conclusions.

To gain an understanding of the research topic, the researcher has studied domestic
and foreign documents related to credit in the agricultural value chain. The materials that
the fellows have read focus on the following four groups: Marxist-Lenin Political
Economic Curriculum; Relevant documents and policies of the Party, Government and
all levels in the banking and agricultural industry; Basic theoretical documents related to
the thesis; the studies on issues directly related to the thesis (monographs, essays, articles,
magazines ... etc).
2.1.3. Research strategy
In this thesis, the research strategy of the fellows is as follows: Inheriting research
methods from scientific research projects related to the thesis; Specific case studies;
Quantitative methods, methods of collecting secondary data.
2.2.THE RESEARCH DESIGN
2.2.1. Develop questionnaires
The study was conducted through a questionnaire by Likert rank scale with 5 points
because this is a scale using a positive number sequence. The questionnaire is based on
the following factors:
- Research purpose: assess the factors affecting credit deployment in the value chain
of pangasius catfish industry.
- The survey objects are credit officers and leaders of bank branches in the area with
large pangasius catfish farming areas. Due to time constraints, in this thesis, the
researcher only focuses on the local survey of large pangasius catfish farming area in the
period from 2015 to 2017.
- The survey is recorded through two methods: direct survey and indirect survey (sent
by mail / email).
2.2.2. Research models
With the purpose of research is to analyze the factors affecting the credit deployment in
the value chain of pangasius catfish industry, the thesis using SEM linear structure model.


11

SEM model has 3 advantages as follows:
- SEM allows modeling and verification of multi-dimensional phenomena
simultaneously. Therefore, SEM becomes a testing method used by many researchers.
- The techniques in SEM have taken into account tolerance when analyzing statistical
data.
- SEM model has been studied and completed in a long time, especially the ability to
analyze and verify.
So far, there are many different software used to conduct SEM analysis such as
AMOS (Arbuckle & Wothke, 1999), LISREL (Joreskog & Sorbom, 1993), Mplus
(Muthen, 2004), SEPATH (Statsoft, 1998). In this study, the researcher used the software
as AMOS 20.0.
To perform SEM analysis, the researcher performs 6 steps as follows:
2.2.2.1. Specify model
Specifying the model involves identifying all possible relationships and parameters in
the model related to the field of study.
2.2.2.2. Model identification
A model is identified when all parameters in the model are uniquely identified by just
enough information in the S matrix or there is more than one way to estimate one or more
parameters, due to the matrix S has more information than the parameter to be estimated.
2.2.2.3. Estimating the model
The researcher performs data entry on Excel tables. Each line is for 1 survey
questionnaire. Each column is a data field corresponding to a question. The data entry is
done in order of questions and loyal to the value in the questionnaire, not adjusted to the
data. To ensure accuracy, the researcher makes data entry twice independently and
reconciles after completing data entry.
Issues to be addressed include: Determining sample size for research with different
levels of complexity of the model; Sample size ratio to number of parameters; The type
of inspection used for estimating parameters to consider; The estimation technique is
consistent with sample data; Data input is raw / shortened; Check the reliability of the

scale; Estimating regression coefficients and t-value; Identify suitable models.
2.2.2.4. Review model


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Evaluation of the model is to determine whether the data is suitable for the model
through general testing of the relevance of the whole model and survey the suitability of
each parameter in the model or not.
The evaluation methods include: Determined factor analysis (CFA); Chi-Square test
(χ2); Chi-Square ratio / degrees of freedom; Other related indicators: GFI, AGFI, CFI;
Use bootstrapping method.
2.2.2.5. Adjust the model
The model adjustment index is an index that estimates the change of χ2 for each case in
addition to a possible relationship (corresponding to a reduction in degrees of freedom).

2.2.2.6. Report results
The final model as well as other suitable models need to have independent data sets,
or quite large initial sample sizes. The value results of the model ensure the following
factors: Simulation of the model using other data sets (multi-sample data analysis);
Report the effect of sample size and trust interval associated with statistical significance
test; Evaluate the results in relation to the original theoretical framework.
2.2.3. Scale of factors
- Potential dependent variable: The success of credit deployment according to the
pangasius catfish value chain coded as TC.
Inheriting the study of the research model Belassi and Tukel (1996) as analyzed in
section 1.2.5, the researcher identified two independent variables: development ability
(PT) and profitability (SL) when developing Credit according to the pangasius catfish
value chain. The overall model with the objective function is as follows:
TC = β0 + β1 PT + β2 SL

The scale of assessing the success of credit implementation in the pangasius catfish
value chain is assessed based on the research of WOCCU (2009) and revised to fit the
value chain of Vietnam pangasius catfish industry, specifically :
- To assess the level of "Meeting customers' demand for loans", the researcher uses
the following criteria: credit scale, product structure, loan outstanding balance. These are
the 3 criteria to show customers' demand for loans for banking products.
- To assess the level of "reducing credit risk through monitoring the cash flow and
value chain activities", the researcher uses the criteria of bad debt. This is the result of


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credit risk. Bad debt is the money that the bank lends to the customer but cannot recover
because the customer is unable to pay the debt.
The scale of evaluating the success of credit implementation according to the
pangasius catfish value chain is shown in Table 2.1, specifically:
Table 2.1: Scale measuring credit success
according to the pangasius catfish value chain
Group

No.

Code Description

Succes 1
sful
imple
mentat 2
ion

TC1

The bank grows credit outstanding balance by pangasius
catfish value chain

TC2

The bank increases the market share of customers taking
credit according to the pangasius catfish value chain

3

TC3

Credit bad debt in the pangasius catfish sector decreases
compared to before implementing the value chain credit for
pangasius catfish industry

4

TC4

The bank sells many other products and services to borrowers
according to the pangasius catfish value chain
Source: Author's description (2018)

Group

No.

Table 2.2: Scale to assess growth and profitability
Code
Description

Ability 1
to
develop

PT1

2

PT2

3

PT3

Author

Readiness to expand lending market by Reardon
credit according to Pangasius catfish value and
Timmer,
chain
2012
The willingness to expand the lending
object by credit according to the pangasius
catfish value chain
Readiness to increase loan outstanding
balance by credit according to the

pangasius catfish value chain


14

Group

No.

Code

Description

Author

profita
bility

1

SL 1

Credit by value chain of pangasius catfish Nieuwenh
et
industry increases the number of potential uizen
al., 2004
customers for banks

2

SL2

Credit in the value chain of pangasius
catfish industry increases profits for banks

3

SL3

Credit in the value chain of the pangasius
catfish industry helps the bank control
loans better
Source: Author's description (2018)

Model of evaluating credit deployment in the value chain of Pangasius industry with
30 propositions measures 30 factors in 8 aspects: liquidity, risk management, operational
advantages, capacity to participate in value chain of global pangasius catfish industry,
macroeconomic environment, bank benefits and existence, non-credit support operations.
These 30 variables are coded specifically in Table 2.3.
Table 2.3: Scale of variables in potential independent variables
Group

No.

Code Description

Liquidity

1

TK1

2

TK2

3

TK3

In case of non-compliance with the
purchase contract, the violating party
will accept a fine

4

RR1

5

RR2

Many agricultural insurance products Jessop et
are offered for sale
al., 2012;
Mattern
Units in the pangasius catfish value andTarazi,
2015
chain buy agricultural insurance

Risk
Management

Author

Operation of the pangasius catfish Singh,
value chain based on the purchase 2011;
and sale contract
Christen
and
Units in the pangasius catfish value Anderson,
2013
chain comply with sales contracts


15

Group

Operational
advantages

Capacity to
participate in
the global
pangasius
catfish value
chain

No.

Code Description

Author

6

RR3

The legality of collateral in credit is
clear in the pangasius catfish value
chain

7

RR4

Liquidity of collateral in credit
according to the high value chain of
pangasius catfish industry

8

RR5

Units in the value chain of pangasius
catfish
have
collateral
when

borrowing

9

LT1

Vietnam's natural conditions and
geographical location are favorable
for pangasius catfish farming and
production

10

LT2

There are many policies to support
credit in the pangasius catfish value
chain

11

LT3

Pangasius catfish prices are stable

12

LT4

Simple preservation of post-harvest

13

NL1

The facilities of the units in the chain Dinh Van
ensure the pangasius catfish farming Thanh,
/ production
2009

14

NL2

Ability to comply with regulations
on process of creating, nursing,
cultivating,
registering
aquatic
product labeling, ensuring good food
hygiene and safety

15

NL3

The workforce involved in farming,
processing and producing pangasius
catfish have technical and experience

16

NL4

Vietnamese Pangasius catfish is a
favorite agricultural product by

Winn et
al., 2009;
Konig et
al., 2013


16

Group

No.

Code Description

Author

domestic and foreign consumers
Macroeconomic 17
environment

18

Benefits

The existence
of banks

Hoạt động của
đơn vị hỗ trợ
phi tí
n dụng

VM1 The macroeconomic environment Winn et
affects the value chain of pangasius al., 2009;
catfish industry
Konig at
al., 2013
VM2 Stable exchange rate helps stabilize
the value chain of pangasius catfish
industry

19

VM3 Competition in the field of
manufacturing
and
exporting
pangasius industry is a healthy
competition

20

LI1

Diversification of banking products

21

LI2

Cash flow management

22

LI3

Managing production activities of
customers

23

LI4

Improve customers’ income

24

HH1

25

HH2

26

HH3

The product is regularly introduced G.Mankiw,
on mass media
2005;
S.Wheelan,
Bank officers have a good 2002;
knowledge of the pangasius value Miller and
Jones,
chain
2010
The bank is responsible for
monitoring production activities of
factors in the value chain

27

HH4

The bank has many transaction
locations

28

HT1

There are many studies on science
and production method technologies

in the pangasius catfish industry

Madu,
2012;
Collier,
2014

Coon et al.,
2010; ;
Miller and


17

Group

No.

Code Description

Author

29

HT2

There are many forecasts about Jones,
demand and price of pangasius of 2010
consumers

30

HT3

The bank has good relationship with
non-credit support units
Source: Author's description (2018)

2.2.4. Identify samples and collect data
The Mekong Delta is the area with many localities with large pangasius farming
areas, providing 98% of pangasius production nationwide. In 2017, the area has 44,195
commercial pangasius catfish ponds. In which, 3 localities have large Pangasius farming
in the period of 2015 – 2017 including Dong Thap, An Giang, Can Tho. Therefore, the
researcher carried out the data collection focusing on the above three localities. The
researcher made 370 questionnaires issued.
The researcher has divided into 3 survey bank groups as follows:
- Group of State-owned commercial banks: Vietnam Bank for Agriculture and Rural
Development, Construction Bank;
- Group of State-owned commercial joint stock banks: Joint Stock Commercial Bank
for Foreign Trade of Vietnam, Vietnam Joint Stock Commercial Bank for Investment and
Development, Vietnam Joint Stock Commercial Bank for Industry and Trade;
- Other joint stock commercial banks: Mekong Delta Housing Development Bank
and Joint Stock Commercial Bank of Saigon - Hanoi;
Survey activities focus mainly on 2 groups of banks with the participation of the State
because these two groups have loan outstanding balance for large pangasius industry1.
In 2007, the loan outstanding balance of pangasius industry of State-owned commercial
banks and State-owned joint stock commercial banks group respectively accounts for 44%
and 19.7% compared to total loan outstanding balance of the whole pangasius industry.

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Table 2.4: Allocating survey forms by bank group
Unit: number of questionnaires
StateStateOther
Total
Criteria
owned
owned
joint-stock
commercial joint stock commercial
banks
commercial
banks
Group
banks
group
group
167
135
68
370
Number of survey forms
issued
164
133
55
352
Number of valid survey
forms collected on

Source: Author's description (2018)
CHAPTER 3: ACTUAL SITUATION OF BANK CREDIT ACCORDING TO
VALUE CHAIN FOR VIETNAMESE PANGASIUS INDUSTRY
3.1. OVERVIEW OF BANKING CREDIT ACTIVITIES ACCORDING TO THE
VALUE CHAIN IN AGRICULTURE – RURAL SECTOR
3.1.1. Policies, regulations and implementation guidelines
In order to continue developing the orientation of supporting small and medium
enterprises to develop industry linkages in the rural and agricultural value chain, in order
to solve capital problems, the Government issued Resolution No. 14/NQ-CP requiring
ministries, agencies and localities to focus on solving difficulties, promoting production
and developing business through a pilot lending program for agricultural development by
linking models in agricultural product production chain. After that, the Governor of the
SBV issued Decision No. 1050/QD-NHNN dated 28/05/2014 on a pilot lending program
for agricultural development according to Resolution No. 14/NQ-CP dated 05/03/2014 by
the Government to guide commercial banks to perform pilot credit according to the
agricultural value chain.
3.1.2. Results of bank credit implementation according to the value chain in
agricultural and rural sector
As of 31/12/2017, credit debt in agriculturaland rural sector reached 1,310,832 billion
VND, an increase of 25.5% compared to the end of 2016 (higher than the general credit
growth of 18.17%). Compared to lending to rural agriculture, the disbursement turnover for
credit according to the implemented agricultural value chain is still limited, accounting for a
small percentage, ranging from 0.18% to 0.78% in the period of 2015 - 8/2018.


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In the production according to agricultural value chain, cooperatives play a role as a
link with farmers and enterprises. The relationship between cooperatives and members is
a two-way interaction. However, the cooperative does not access loans according to this

loan model pilot program. The main beneficiaries to access loans according to the
agricultural value chain in 2017 are farmers (accounting for 54% of disbursement
turnover) and manufacturing enterprises (accounting for 46% of disbursement turnover).
In terms of loan term, value chain credit mainly meets the demand for short-term
loans and additional working capital. The proportion of short-term credit debt/ total credit
debts for the agricultural sector in September 2018 is 91.3 %%; while this proportion of
medium and long-term debt is 8.7%.
For the pilot value chain credit program in the agricultural and rural sector in the
period of 2014 - 2016, the SBV, Ministry of Agriculture and Rural Development and
Ministry of Science and Technology selected 28 enterprises in 22 provinces and cities
nationwide to implement 31 agricultural production projects according to the model of
linking and applying high technology. These are 28 typical enterprises representing 8
rural and agricultural production industries in 5 regions nationwide: Northern Midlands
and Mountain Areas; Red River Delta Region; North Central and Central Coast Region;
Mekong Delta region; Highlands region.
In order for customers to trade with the bank better, there were commercial banks
implementing "transaction points with specialized cars" (Agribank). Combining loans
according to value chains, the formation and development of mobile transaction points
contribute to reducing costs, increasing labor productivity, expanding production scale
and helping customers manage cash flow effectively. Banks also enhance information
security and safety to manage and handle risks related to security.
Credit according to the agricultural value chain has created conditions for a number of
key enterprises to implement chain-linked models, promote new trends in agricultural
production towards efficiency, improving added value and sustainable development,
bringing benefits to both focal businesses, farmers and commercial banks:
- For key enterprises linked in the value chain: When participating in the pilot program,
enterprises have conditions to stabilize quality input materials, conveniently access to bank
loans without security assets.
- Households participating in the value chain are according towritten post-harvest
products by enterprises at stable prices, are provided with inputs and materials at a cost

lower than the market price; are consulted, guided and supported technique for farming,
contributing to improving product quality and limiting risks of epidemic disease.


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- For loan commercial banks: better control of cash flow through commitment of the
parties in the chain; Besides, other banking products and services are also developed.
According to the report of the survey results of the Banking Strategy Institute - SBV issued
in January 2017 through the form of survey forms in 28 provinces/ cities across the country,
credit activity according to the value chain are considered as potential business segment
and 66.4% of banks plan to expand this activity.
However, credit development in the agricultural-rural value chain in Vietnam has
many risks, including credit risks, operational risks and market risks:
- The agricultural value chain has not yet operated effectively, matching the advantages
and the role of the chain. Therefore, the outstanding loan disbursements for credit
according to the developed value chain are still limited.
- Different from the pilot program, the actual implementation of credit according to the
value chain will face difficulties, particularly: Coordination among ministries, departments
and branches; legal regulations have not been addressed to the agricultural product value
chain; Vietnam's agricultural product market has just faced fierce competition, and faced
protection through technical barriers set by importing countries.
- Value chain credit has been deployed in Vietnam since 2014. After four years of
implementation, there are still many obstacles to remove:
+ Assets formed from projects on agricultural land for agricultural production activities
(greenhouses, ponds, ...).
+ The signing of linkage contracts between enterprises and people.
+ Process of loan instruction and cash flow monitoring
3.2. CURRENT STATUS OF CREDIT ACTIVITIES ACCORDING TO THE VALUE
CHAIN OF VIETNAMESE PANGASIUS INDUSTRY

3.2.1. Description of the study area
3.2.1.1. An Giang Province
An Giang is one of the provinces with the largest arable land in the Mekong Delta.
Total land area in 2017 is 353,668 ha, of which agricultural land accounts for 84.42% and
aquaculture land accounts for 1.13%. The proportion of land for agricultural purposes
always accounts for the majority of the province's land structure.
3.2.1.2. Dong Thap Province


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Dong Thap is one of four provinces in the key economic region of the Mekong Delta.
With the advantage of natural conditions including suitable land for agricultural
development of abundant water resources and non-saline water, Dong Thap's agricultural
sector thrives and becomes one of the key agricultural production provinces in Vietnam.
3.2.1.3. Can Tho City
Can Tho is located in the tropical monsoon climate area, with little storms, hot and
humid all year round without cold season. This advantage is very favorable for the
growth and development of organisms, can create a system of high-yield tropical
agriculture, with many types of seedlings, creating diversity in production and production
restructuring.
3.2.2. Bank credit process according to value chain for pangasius industry
Step 1: Determination of the list of customers selected for loans
- The customer sends the contract of association and consumption production, the
application for approval of the project / plan, the introduction of the project and the
application for approval of the project / plan sent to the People's Committee and
Provincial Department of Agriculture and Rural Development.
- Based on the proposal of the provincial/ municipal People's Committee, the State
Bank shall coordinate with the Ministry of Agriculture and Rural Development and the
Ministry of Science and Technology in approving the list of associated key enterprises.

- For farmers and cooperatives representing farmers, the SBV coordinated with the
Ministry of Agriculture and Rural Development and the Ministry of Science and
Technology to approve the list of customers who signed a chain-linked contract with an
approved enterprise.
- List of customers who are allowed to participate in the value chain and have a
demand for loans is transferred to the bank to be considered for loan approval.
Step 2: The bank provides loans according to value chain of the pangasius industry
- The bank appraises customers according to the list received from the provincial/
municipal People's Committee. In addition to satisfying the conditions for participating in
the value chain as mentioned in step 1, customers must also meet the loan conditions:
Conditions on legal entity, financial conditions, conditions on feasibility of plans/
projects, conditions on security assets and other conditions, specifically as follows:
conditions on legal entity; purpose of capital use; financial conditions; feasibility of the
plan/ project; conditions on loan security assets.


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- In case the bank agrees to lend, the bank will notify the customer, the provincial/
municipal People's Committee and specify the loan amount, interest rate, term and other
conditions. Compared to normal lending programs, value chain credit has more
advantages in terms of interest rates and collateral conditions.
- In case the bank does not agree to lend, the bank will notify the customer, the
provincial/ municipal People's Committee, the State Bank and state the reason for the
refusal of the loan.
- Banks, enterprises and farmers sign the tripartite principle contract. Accordingly,
this contract clearly states the conditions to be complied between the bank, the focus
subject and the farmer association.
- Enterprises and farmer households sign credit contracts and specify criteria for loan
purposes, payment methods, payment terms, loan amounts, interest rates and loan terms.

- Based on the demand for raw materials (Feed, aquatic medicine) of farmer
households, the bank will disburse to the focal subject to pay for the purchase of raw
materials for the material supplier.
- Up to 7 months, farmer households harvest fish and sell to enterprises in the value
chain who have signed a tripartite principle contract.
- Enterprises and banks will sign disbursement certificates to pay farmers the amount
of pangasius purchases in the form of transfer to farmers’ account opened at the bank.
- After the money is credited to the farmer's account, the bank performs collection of
all farmers' debts. Value chain credit will end when the enterprise makes a loan
settlement with the bank.
3.2.2. Classification of financed products
In terms of stages in the value chain of the pangasius industry, 4 stages are
financed including: Pre-harvest advance; Harvesting and processing; Consumption and
export; Investing assets in service of pangasius production and processing.
In terms of lending objects, financed products include: Material suppliers (Pangasius
feed, medicine); Farming unit; Production - distribution units.
Accordingly, the banking products supplied in the pangasius value chain include: shortterm loans, long-term loans, payment guarantees, collection at the point, network collection
for enterprises or distribution agencies, demand deposits, term deposits, insurance,
guarantees, domestic and international payment services, and foreign currency trading.


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3.2.3. The situation of bank credit development according to the value chain for
Vietnam pangasius industry
3.2.3.1. Credit scale according to the value chain of pangasius industry
Similar to credit according to the agricultural value chain, the loan disbursement
turnover according to the pangasius value chain tends to increase gradually from 2014 to
2016 and gradually decreases from 2016 to now, concentrating mainly in State-owned
commercial banks. The growth rate of credit disbursement according to the value chain

of pangasius industry increased 261% from 2014 to 2015 but from 2017 to September
2018 decreased by 27%. The reason is that in 2014 was the year when credit was started
according to the value chain of pangasius industry, so in 2015, there was a big growth
because of the arising new debt. By 2016, the pilot program ended and changed to the
actual loan program.
The main beneficiaries of access to loans according to the value chain model of the
pangasius industry are enterprises (accounting for 53% to 59% of total disbursement
turnover), the remaining beneficiaries of access are farmer households. Accordingly,
enterprises often operate in the areas of processing, distribution and consumption. The
cost of forming and maintaining these enterprises' activities is diversified, including
factories, machines, equipment, human resources ... so the demand for loans is high.
Compared with the disbursement turnover for credit according to the agricultural
value chain, the disbursement turnover for credit according to the pangasius value chain
accounts for a large proportion, ranging from 63% to 94% in the period of 2014 - 2017.
Credit debt according to the value chain of the pangasius industry also decreased
gradually in the period of 2014 - 2017, accounting for a very small proportion compared
to the debit balance of the agricultural and rural sector, only ranging from 0.07% to 0.2 %
in the period of 2014 - 2017. This shows the credit in the agricultural value chain in
general and the pangasius industry in particular has not developed corresponding to the
development of the industry.
The scale of the number of customers accessing credit capital according to the value
chain of pangasius industry also tends to decrease from 2016 up to now, concentrating on
the following reasons: have not found the value chain of pangasius industry for
investment; customers are not eligible for loans; obstacles to the legal corridor.
3.2.3.2. Credit quality
The fluctuations in personnel of the representative unit in the chain have led to the
failure of enterprises to comply with the tripartite principle contract with banks and