Challenges to Rural Poverty Reduction in Viet Nam - Oxfam Blogs

Participatory poverty monitoring in rural communities in Viet Nam
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Cooperatives and farmers’ groups can help farmers cope with changing prices,
but this form of assistance is small and not very popular. Only 2 of the 10 monitoring
points (Thanh Xuong-Dien Bien and Duc Huong-Ha Tinh) have cooperatives or mass
organizations which are active in selling fertilizer to members through partnership with
Agricultural Material Companies (Box 4.1). Due to fixed prices at the time of fertilizer
delivery and late payment between 3 and 6 months with bank interest rate, members
of cooperatives or mass organizations can lessen their difficulties when the price of
fertilizer increased. In Duc Huong-Ha Tinh, in 2011, the price of fertilizer increased a
lot, but the price of peanuts declined sharply, agents reduce the amount of fertilizer
lent to farmers, therefore many households shifted over to borrowing fertilizer from the
Farmers’ Association. In late 2011, the volume of fertilizer lent to farmers by the Farmers’
Association in Duc Huong commune-Ha Tinh was more than double that at the same
time in 2010, making up 25-30% of the local fertilizer market share.
BOX 4.1. Cooperatives support farmers in fertilizer
Before 2009, members of the Management and team leaders of the Agricultural
Cooperative in Thanh Xuong commune (Dien Bien district, Dien Bien province) had
to use their personal red book as collateral for bank loans to buy fertilizer for its
members. Since 2010, the purchase of fertilizer has been easier because the Dien
Bien Provincial Agricultural Material Company has agreed to allow the Cooperative
to guarantee for farmers to buy its supplies on credit and repay after crop harvests.
One or two months prior to the crop, farmers register the amount of fertilizer needed to
the head of the village (who is also the manager of the cooperative), and then villages
report the total amount to the cooperative to sign a contract with the Agricultural
Material Company. The price of fertilizer is fixed at the time of delivery to farmers.
The interest rate of delayed payment is calculated according to the interest rate
applied by the Bank of Agriculture and Rural Development at the time the contract
is signed (in the 2010 Summer-Autumn crop it was 1.25%/month, that in 2011 was
1.68%/month). In addition, the Company gave a head of village VND50,000 per ton of
fertilizer registered by farmers.
In the context of high fertilizer price, partnership between Agricultural Material
companies, cooperatives and villages in the sale of fertilizer on credit with delayed
payment has helped households have more opportunities to invest in their production.
By the end of 2011, 21 of 24 production teams in the whole commune registered to
by fertilizer through the Cooperative totalling nearly 105 tons (accounting for 70% of
the total volume consumed by the commune). Cooperative cadres and local residents
said all households repaid on time.
--- “The whole group borrowed fertilizer through the village head, following the
announcement of the village head all villagers went to the store to get fertilizer. In the
Spring-Summer crop, we have to repay on July 15, and in the Summer-Autumn Crop,
October 15. Everyone repaid fully...” (poor men and women groups in Pa Dong village,
Thanh Xuong commune).
Small shops and vendors are not affected by price volatility. Shops and vendors form
a supply network of rice, food, and necessities. They also purchase small amounts of
agricultural produce in remote areas. A popular activity is to buy goods in district towns
to be resold to local residents in cash or on credit with interest at a 10-30% profit. Poor
households can only buy small amounts on credit, and they must repay quickly. Many
of the poorest households are not allowed to buy on credit. Small volumes and rapid
payment mean shops and are not affected by price volatility.