3. CREDIT USE AND CREDIT NEEDS OF FISH FARMERS

3.1 Demographic characteristics of fish farmers

The study indicated that men predominantly carry out fish farming (Table 22). Women account for less than 10 percent of fish farmers and contrary to expectations, this was lower than women’s participation in capture fisheries in Viet Nam. As in the case of fishers, the most common age bracket of fish farmers was 41 to 50 years irrespective of gender followed by age groups 31-40 and 51-60 years (Table 23).

TABLE 22
Number of male and female fish farmers

TABLE 23
Age of fish farmers by gender

Male fish farmers were better educated than fishers. Lower and upper secondary education was the most common educational level of male fish farmers (Table 24). When comparing the educational level of both female and male farmers it can be observed that the educational level of female farmers was lower that that of their male counterparts. Illiteracy was rare among male fish farmers though less rare among female fish farmers.

TABLE 24
Education of fish farmers by gender

Fish farmers and fishers alike appeared to be adequately educated to i) make use of institutional credit facilities, (ii) comply with application and documentation procedures, (iii) to read and understand loan contracts and conditions as well as loan disbursement and repayment schedules. They should also be able to manage their farming enterprises as far as the necessary reading; writing and basic arithmetic skills are concerned.

As far as gender is concerned, financial institutions should be aware when appraising loan applications that fish farming in Viet Nam was not an exclusively a male activity and that there were a substantial number of women, who managed, owned and/or operated fish ponds and fish farming enterprises. Thus, public and private financial institutions should make sure that women also benefit from credit programmes for fish farming in Viet Nam.

3.2 Occupational characteristics of fish farmers

In most households included in the fish farmer sub-sample, fish farming accounted for the major share of the total income of the household (Table 25). For almost two-thirds of the households, it accounted from 61 percent to 100 percent of all household income but the income derived from capture fisheries was an even more important source of household income.

TABLE 25
Contribution of fish farming to household income

The fish farmers surveyed were almost exclusively private households, 5 percent of the fish farmers interviewed carry out this economic activity together with others as a group (Table 26).

TABLE 26
Type of fish farm ownership

As far as the scale and type of operation is concerned, information was provided on the total pond area and number of ponds owned by the farmers, the area used for fish culture as well as on the expenditure incurred.

The size of pond area owned by the fish farmers varied widely, ranging from 150 to 3 500 000 m² (Table 27). The most common size of ponds owned by fish farmers ranged from 10 000 to 24 000 m². Twenty-five percent of all fish farmers own ponds smaller than 2 500 m². Almost 10 percent of farmers owned large ponds ranging from 100 000 to 700 000 m² while very few (3 percent) respondents owned very large ponds in the range of 1 000 000 m² to 3 500 000 m².

TABLE 27
Total available pond area for fish farming

When comparing the total pond area available with the pond area used for fish farming, a similar picture emerges as shown in Table 28 This suggests that almost all the pond area owned by the fish farmers was used for fish farming and very little was kept idle or was exclusively used for other purposes.

TABLE 28
Total pond area used for fish farming

Table 29 gives the number of ponds owned per fish farming household. About half of the farmers surveyed owned just one pond. About 20 percent owned two ponds and 13 percent of the fish farming households own three ponds. A few households, i.e. 4 percent, owned in excess of seven ponds.

TABLE 29
Number of ponds owned per fish farming household

3.3 Access and use of credit by fish farmers

Perception of accessibility of credit

Farmer perception of access to credit in the various regions is given in Table 30. Access to credit from financial institutions such as the Viet Nam Bank for Agriculture and Development (VBARD), the Social Policy Bank (SPB). The Viet Nam Social Policy Bank, the Development Assistance Fund of Viet Nam (DAF), other state-owned financial institutions and private banks was perceived to be more difficult in the central region than in the other two regions.

TABLE 30
Assessment by fish farmers of accessibility to credit sources by region

The majority of fish farmers interviewed found it difficult or very difficult to access credit from financial institutions for fish farming. These were probably the poorer fish farmers, who could not meet the collateral and documentation requirements of financial institutions and for whom special microfinance programmes would need to be introduced.

Access to credit provided by other institutions and organizations such as people’s committees, cooperatives, mass organizations, NGOs and international Government organizations (IGOs), which probably account for a smaller share of overall credit supply, was perceived as being more difficult in the northern region than in the central and in the southern region.

The financial institutions which were more easy to access in the northern region were VBARD and SPB while DAF was more easy to access in the southern region.

It is interesting to note that in common with fishers, fish farmers, with the exception of those in the central region, perceived VBARD and SPB more easily accessible than other financial institutions and other organizations.

As far as access to credit for fish farming from informal sources i.e. moneylenders, business partners, relatives and friends are concerned, a different picture emerges for the three regions. This was probably related to regional differences in social and business relations and customs. In all cases of informal credit these sources are easiest to access in the southern region, followed by the central and the northern region.

Several reasons were mentioned for difficulties in obtaining credit from financial institutions. The respondents gave the following. i) Fish farmers are too poor to provide collateral or to meet equity requirements, (ii) in many cases, the amounts needed by them were too small to be of interest to banks, (iii) in some cases, loan ceilings were considered too low compared with the requirements of the potential borrowers, (iv) complicated loan documentation requirements, (v) delays in processing of loan applications and loan disbursements, (vi) short repayment periods, (vii) lack of knowledge about lending policies and procedures, (viii) lack of mutual trust, (ix) inflexibility of repayment schedules with tight repayment schedules and short repayment intervals, and (x) distance to bank branch, high interest rates. With respect to credit from private moneylenders, high rates of interest were mentioned.

Overdue loans

According to farmer perception, which might sometimes differ from the view of the lender, overdue loans are less common in the northern and central region than in the southern region, where more than 10 percent of the respondents admitting having had an overdue loan during the last three years (Table 31). These differences between the regions are very similar to the ones observed in the case of capture fisheries in Viet Nam.

TABLE 31
Overdue loan commitments of fish farmers by region

Assuming the information provided by borrowers was reliable, overdue loans were much less of a problem in aquaculture than in capture fisheries.

In all three regions the main reason for their inability to repay their loans was natural calamities such as floods and storms. This was followed by low quality of fingerlings, fish seed and fish diseases. Few respondents in the southern region mentioned lack of markets and a few respondents in all regions mention that there were too many fish farmers and consequently too much competition, which hampered the profitability of the fish farming operations and the ability to repay loans.

Credit in kind

Borrowing in kind for fish farming was very common in the northern and southern region of Viet Nam, where almost every respondent had taken a loan in kind during the last three years. It was still common in the central region, where more than three quarters of all respondents took a loan in kind. The items advanced for credit in kind were fish feed, fingerlings and chemicals, which were supplied by wholesalers and middlepersons, who deducted their cost later at the time of buying the fish.

TABLE 32
Credit for fish farming in kind by region

3.4 Plans for fish farm development and related credit needs

Many respondents were planning to expand their fish farming activities by renting or constructing more ponds, improving existing ponds and intensifying production, moving into cage culture of fish, and by buying and stocking more fingerlings.

Farmers perceived their investment opportunities as limited though, as most of them did not think that they could rely on financial institutions for credit support. Informal lenders were also not seen as a viable and realistic alternative.

The investments envisaged ranged from as little as VND 300 000 to as much as VND 40 000 000 for construction of additional ponds.

3.5 Conclusions and recommendations on meeting credit needs of fish farmers

i. In contrast with capture fisheries in Viet Nam, credit does not seem to presently play an important role in financing of capital investments and working capital requirements in fish farming in Viet Nam. There seems to be however, a significant demand for credit for future investments to expand and improve of fish farming.

ii. Institutional credit seemed to be a greater problem in the central part of Viet Nam than in northern and southern region. Access to credit from financial institutions such as the Viet Nam Bank for Agriculture and Development, the Social Policy Bank (SPB), the Development Assistance Fund of Viet Nam, other state-owned financial institutions and private banks were perceived to be more difficult in the central region than in the other two regions.

iii. More than half of all fish farmers interviewed found it difficult or very difficult to access credit from financial institutions. These were probably the poorer fish farmers, who could not meet the collateral and documentation requirements of financial institutions and for whom special micro-finance programmes would need to be introduced.

iv. In recent years, a UNDP funded and FAO executed project implemented in three provinces of northern Viet Nam i.e. Son La, Lai Chau and Hoa Binh had demonstrated how fish farming can develop if supported through micro-credit in cooperation with women union and groups of fish farmers. The DANIDA supported ‘Support for Freshwater Aquaculture (SUFA)’ component of the Fisheries Sector Programme Support (FSPS) is presently implementing a similar microfinance model in one northern and two central provinces of Viet Nam.

v. As a first priority for improving the access of small-scale fish farmers to institutional credit, it is recommended that the Social Policy Bank, based on the model developed by the two projects, mentioned in above paragraph introduces a micro-finance programme for fresh water fish farming, which particularly aims at poverty alleviation through short-term credit, both for capital investment and working capital needs and which also enhances the economic and social role of women in fishing communities. Group lending, linking credit to savings mobilization and supporting micro-enterprises outside the fisheries sector and fish farming should be an important element of such a microcredit programme. FAO could provide technical support in the design and implementation of such microfinance programmes.

4. CREDIT USE AND CREDIT NEEDS OF FISH WHOLESALERS

4.1 Occupational characteristics of wholesalers

Fish wholesaling was a major economic household activity (Table 33). In more than half of the fish wholesaling households surveyed, this activity accounted for the entire household income. For another 30 percent it accounted for 61 to 95 percent of the household income. In a small minority of households (5 percent) wholesaling accounted for less than 40 percent of the total house income. Those involved in wholesaling of fish in Viet Nam were engaged in this as their main economic activity and not as a secondary occupation.

TABLE 33
Contribution of fish wholesaling to household income

The majority (60 percent) of fish wholesalers were located in city centres. One quarter was located in local markets in communes and villages while the rest are located in regional markets at the provincial and district level.

TABLE 34
Location of fish wholesale business

Private households owned the vast majority i.e. 87 percent of fish wholesale businesses (Table 35). Another significant number of businesses, i.e. 11 percent was owned by private enterprises. Other forms of ownership were negligible.

TABLE 35
Ownership pattern of fish wholesale businesses

The average monthly purchase of fish and fish products was used as an indicator of the scale of operation of the fish wholesalers. The scale of operation of fish wholesaling varied widely (Table 36). The average amount spent per month for procuring fish and fish products ranged from as little as less than VND 4 500 000 (= US $ 300) to as much as VND 6 000 million (=US $ 400 000).

TABLE 36
Business volume of fish wholesalers

The majority of wholesalers were smallscale enterprises. Sixty one percent of the wholesale operations purchased fish in the range of VND 10 000 000 (=US$667) to VND 197 000 000 (=US$ 13 133) per month. Twenty-two percent of the respondents had larger wholesale businesses and 17 percent smaller ones. The median class was VND 20 000 000 to 48 000 000 (=US$1 333-3 200).

The cost of operation (which included the rent of buildings, operating costs of vehicles, transportation costs, cost of fuel, electricity, ice, salt, taxes, fees, labour costs, interest on loans, etc.) and size of business was used as an additional indicator. The average monthly operating cost incurred of fish wholesaling ranged from as little as less than VND 500 000 (= US$33) to as much as VND 585 000 000 (=US$39 000). The median class was VND 2 067 000- 2 980 000 (=US$138-199).

Operation costs of procuring fish for wholesaling amounted to about 7 percent of procurement costs.

4.2 Present use of credit

Self-financing and use of credit for capital investment and working capital

Wholesalers were an important informal source of credit for fish farmers and fishers. They were the only or major source of this type of credit. In terms of cash credit to fishers, wholesalers only played a minor role with regard to financing of capital assets but they meet more than half of the working capital needs of fishers.

Another indicator for the scale of business is the money invested in fixed assets from own resources (Table 38). Investments from own resources in fixed assets ranged from as little as VND 1 301 000 (=US$87) to as much as VND 5 000 million (US$333 333).

TABLE 37
Average monthly operations cost of fish wholesalers

TABLE 38
Self-financing of fixed assets purchased by wholesalers over last three years

The median class was the investment range from VND 10 000 000 to 19 400 000 (US$667-1293). The data suggest that fixed assets was only a minor cost component of fish wholesaling in Viet Nam when compared to operating costs.

Self-financing of fixed assets of wholesalers varied between the regions (Table 39). Self-financing of fixed assets was largest in the central regional, followed by the southern region of Viet Nam. In the central region, the median class was from VND 20 000 000 to 50 000 000. In the southern part of Viet Nam the median class was lower ranging from VND 10 000 000 to 19 400 000. In the northern part of Viet Nam, the median class was even lower ranging from VND 5 000 000 to 9 000 000.

The extent of self-financing also reflects the sizes and scale of fish wholesaling businesses. Largest wholesaler operations seem to be in the central part and smallest in the northern part (Table 39).

TABLE 39
Self-financing to purchase fixed assets by wholesalers over last three years (VND x 1000) by region

The use of credit for financing fixed assets was not very common among fish wholesalers in Viet Nam. Only 7 to 10 percent of the respondents, took loans over the last three years for meeting their capital investments needs (Table 40).

TABLE 40
Credit taken for capital investment by fish wholesalers by region

Similarly, credit was rarely used for financing working capital requirements across Viet Nam (Table 41).

TABLE 41
Credit taken for working capital needs of fish wholesalers by region

Overdue loans

In the few cases where credit has been obtained by fish wholesalers, loans do not seem to have been repaid in time (Table 42). These data, however, should be interpreted cautiously. The percentages of respondents whose loan repayments are overdue were higher than the percentages of those who have taken a loan over the last three years (Tables 41 and 42). This discrepancy may probably be explained by the fact that the questions regarding use of credit and overdue loans were not answered by all and moreover by a different group of respondents. The data can therefore not be directly compared and the reliability of the answers was therefore limited.

TABLE 42
Overdue loan repayment by fish wholesalers by region

The main reason given for not repaying loans in time was natural calamities, followed by low quality of produce and lack of demand.

4.3 Future credit needs and sources

About three-quarters of the fish wholesalers interviewed during the study had no plans to expand their businesses. Between 28 percent in the south and 20 percent in the north planed to expand their businesses (Table 43).

TABLE 43
Plans of fish wholesalers for business expansion

The investments perceived as necessary by respondents ranged from very small amounts up to VND 12 000 000 000 (Table 44), which was equivalent to US$800 000.

TABLE 44
Expected future investment for business expansion per wholesaler over the next 3 years

The median was between VND 80 000 000 (= US$5 333) and VND 100 000 000 (US$6 667).

The investments to be undertaken for business expansion include purchases of insulated trucks, cash and in-kind advances to owners of fishing vessels, construction of fish processing facilities, diversification of products, construction of cold storage and freezing facilities, purchase of vehicles, purchase of communication equipment such as mobile phones, construction of fish stalls and sales outlets, procurement of more raw materials and increase of trading activities, production of fish feed, shrimp farming, purchase of baskets and containers, construction of infrastructure, increase of working capital for increasing of turnover.

4.4 Perception of accessibility of credit

In common with fishers and fish farmers, fish wholesalers perceived informal sources of credit such as moneylenders, friends and relatives to be more easily accessible than financial institutions and other organizations (Table 45). Compared to fishers and fish farmers, wholesalers find financial institutions less accessible than their counterparts. This was probably related to the fact that fish wholesalers used credit from financial institutions much more rarely than fishers. Efforts to development domestic fish marketing in Viet Nam need to address this imbalance in the credit supply for fish production and fish wholesale marketing.

TABLE 45
Fish wholesaler’s assessment of accessibility of credit by sources

The perception of the accessibility of credit institutions in different regions of Viet Nam is shown in Table 46. Fish wholesalers in the southern region have a much more positive perception of the accessibility to financial institutions than their counterparts in the central and northern regions. This has already been observed in the case of fishers and fish farmers.

Regarding the difficulties of obtaining and using credit, similar reasons were cited by fishers and fish farmers. In the case of financial institutions, complicated lending procedures and certification requirements, collateral requirements, limited loan amounts and lack of knowledge about lending procedures were seen as the main difficulties.

TABLE 46
Fish wholesalers’ assessment of accessibility of credit by sources and by region (%)

In the case of informal credit sources, high rates of interest and small size of loans were seen as major drawbacks.

4.5 Conclusions and recommendations on meeting credit needs of fish wholesalers

i. At present credit does not seem to play an important role in financing of capital investments and working capital requirements of fish wholesaling in Viet Nam.

ii. There seemed to be, however, a significant demand for credit for future investments to expand and diversify of fish wholesaling in Viet Nam. About one-fourth to one-fifth of the fish wholesalers in the different regions planned to expand their business and required significant amounts of investment both for working capital purposes and for capital investments. The investments to be undertaken for business expansion included purchases of insulated trucks, cash and in-kind advances to owners of fishing vessels, construction of fish processing facilities, diversification of products, construction of cold storage and freezing facilities, purchase of vehicles, purchase of communication equipment such as mobile phones, construction of fish stalls and sales outlets, procurement of more raw materials and increase of trading activities, production of fish feed, shrimp farming, purchase of baskets and containers, construction of infrastructure, increase of working capital for increasing of turnover. The median amount, which wholesalers envisaged to invest for the above ranged from the equivalent of US$5 333 to US$6 667. However, there are also respondents who planned to invest much more as well as those who plan to invest smaller amounts.

iii. In common with fishers and fish farmers, fish wholesalers assumed that informal sources of credit such as moneylenders, friends and relatives were more easily accessible than financial institutions and other organizations. Compared with fishers and fish farmers, wholesalers found financial institutions less accessible than their counterparts.

iv. Efforts should be made to develop domestic fish marketing in Viet Nam. There is also a need to address the imbalance in the credit supply for fish production and fish wholesale marketing.

v. Financial institutions in Viet Nam should consider formulating and establishing special lending programmes both for short, medium and long-term lending to meeting the credit needs of fish wholesalers in Viet Nam. These lending programmes should address capital investment needs and working capital requirements. These special credit programmes should support the diversification of fish wholesale marketing to better meet domestic demand for fish and fish products as well as the integration of export marketing with domestic marketing. Credit support should also aim at increasing the economic efficiency and profitability of fish wholesale marketing.

vi. The financial institutions through government may request FAO’s technical assistance for the formulation of special lending policies and procedures for fish wholesale marketing in Viet Nam.