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MANILA, PHILIPPINES (12 December 2000) - Farmers and rural entrepreneurs in Viet Nam will have better access to credit as a result of an US$80 million loan approved today by the Asian Development Bank.
The Rural Enterprise Finance Project will enable the Viet Nam Bank for Agriculture and Rural Development (VBARD) to provide credit for nearly 15,000 micro and small rural enterprises (MSEs) and 18,500 income-generating activities for poor households. It will also allow the Central People's Credit Fund (CCF) and its member, People's Credit Funds (PCFs), to finance 7,500 MSEs and 31,000 income-generating activities for poor households.
Altogether, the project will benefit some 72,000 rural households, over two-thirds of whom subsist below the poverty line. It will also help create over 100,000 new jobs.
"This will accelerate lending to rural businesses and encourage investment by private sector in new technologies which are crucial for their survival in an increasingly competitive environment," says Maurice de Alwis, ADB's mission leader for the project.
Inadequate access to formal sources of finance constrains people from improving their lives in a country where more than a third of the 80 million population are extremely poor. The development of small enterprises is further constrained by high taxes, the predominance of state-owned enterprises (SOEs), a weak legal framework, insufficient market and technology information, and a lack of collateral. The project will address some of these constraints by encouraging reduced lending to SOEs and disseminating information for small businesses.
The project will be implemented in rural areas outside Hanoi and Ho Chi Minh City. It will also encourage household businesses in the informal sector to become registered enterprises, provide better access to resources and create a conducive environment for business expansion.
In addition, ADB will provide a US$1 million technical assistance grant to help create sustainable support services for non-farm and rural businesses. The assistance will establish three pilot rural business centers which will facilitate credit and provide business advisory and training services to rural households.
The ADB will fund 55 percent of the total project cost of US$145.5 million. The VBARD and CCF-PCFs will finance 31 percent, and sub-borrowers the balance. The ADB loan will come from its concessional Asian Development Fund. It will be repaid over 32 years, including a grace period of 8 years. Interest will be 1 percent per annum during the grace period and 1.5 per annum thereafter. VBARD and CCF will be the executing agency for their respective components.