5. CREDIT USE AND NEEDS OF FISH PROCESSORS

5.1 Demographic characteristics of fish processors

The basic demographic characteristics of managers/owners of fish processing enterprises surveyed are given in Tables 47 to 49. One-third of owners/managers of fish processing enterprises were women, confirming the view that women were engaged in the fish processing industry at senior levels (Table 47).

In common with capture fisheries and fish farming, the most frequent age category of managers/owners of fish processing enterprises both women and men, was 41-50 years followed by 31-40 years (Table 48). Women in senior positions in fish processing were older than their male counterparts.

The educational levels of male and female managers/owners of fish processing enterprises were much higher than those of fishers and fish farmers. Almost half of the female respondents and more than half of the male respondents had a college or university degree (Table 49). The educational level of female fish processors, however, was slightly lower that the one of their male counterparts.

The above demographic characteristics illustrate that fish processors have adequate capacity to make use of institutional credit facilities and comply with application and documentation procedures, understand loan agreements and conditions as well as loan disbursement and repayment schedules. Their general educational level, was also adequate for managing their fish processing enterprises.

When appraising loan applications financial institutions should be aware that fish processing in Viet Nam is not an exclusively male activity. Thus, public and private financial institutions should make sure that women also benefit from credit programmes for fish processing Viet Nam.

5.2 Occupational characteristics of fish processors

The majority of fish processing enterprises (60 percent) were located in provincial capitals. Nineteen percent were located in or close to fishing ports, 12 percent in small towns in a rural area and 7 percent in villages.

Fish processing was the sole source of household income for two-thirds of all cases and the major contributor to the household income in another 18 percent of all cases. Only in 12 percent of all cases did fish processing contribute a minor share of the household income.

There were regional differences in the type of ownership of fish processing enterprises (Table 50). The percentage of fish processing enterprises owned by private households was much larger in the northern region than in the central or southern regions. In the north, private households owned almost 80 percent of the fish processing enterprises. In the central and southern regions, the vast majority of fish processing enterprises were either joint stock companies or privately or state-owned.

An indicator for the size and scale of operation is the ‘present value’ of fixed assets of the fish processing enterprises as stated by the respondents. The fixed assets of fish processors in the three regions of Viet Nam are shown in Table 51.

Fixed assets and the scale of fish processing enterprises were distinctly different in the three regions. The fish processing enterprises in the southern and central region are considerably larger than those in the northern region. Twenty nine percent of these large fish processing plants in the southern region had fixed assets ranging from VND 10 420 million to VND 128 800 million (=US$694 667-8 586 667). Onethird of all fish processing enterprises in the southern region had fixed assets in the range from VND 1 021.5 million to VND 4 513 million (= US$68 100-300 867).

TABLE 47
Gender of managers/owners of fish processing enterprises

TABLE 48
Age of fish processors by gender

TABLE 49
Education of fish processors by gender

In the central region, more than 70 percent of the fish processing plants included in the sample had fixed assets ranging from VND 1 021.5 million to 9 410 million (= US$68 100-627 333).

In the northern region, more than seventy percent of the fish processing enterprises in the sample are small enterprises with fixed assets of less than VND 14 million (US$933). The differences in size and scale of operation of fish processing enterprises in the three regions were probably related to the different patterns of ownership in the regions.

The annual cost of production including the costs of raw materials in 2001 is shown in Table 52. The differences in the cost of fish processing between the three regions reflected the differences in size and scale of operations of fish processing enterprises. In the southern region, about one third of all fish processing enterprises had costs of production exceeding VND 103 221.5 million (= US$6 881 433) while in the central region 19 percent of all fish processors fall into this category and only 3 percent in the northern region. In the northern region, the majority of enterprises have production costs as low as VND 11.9 to 100.5 (US$793-6 700) while none of the fish processing enterprises in the central and southern region fall into this category.

When comparing the annual cost of production of fish processing enterprises with the value of their fixed assets it is interesting to observe that the latter is very small when compared with the former.

Another indicator of size and scale of operation is the number of labourers employed by the fish processing plants and enterprises. The number of permanent labourers is given in Table 53. In addition to these permanent labourers, fish processors also hire seasonal labourers. The core and major part of the labour force though are permanent labourers. The figures show a similar picture regarding size and scale of operation as indicated by the value of the fixed assets of the enterprises.

The mainly private household owned fish processing enterprises in the northern region (77 percent) had a small labour force employing one to three labourers. Only 9 percent of the enterprises in the northern region have more than 100 labourers.

TABLE 50
Type of ownership of fish processing enterprises by region

TABLE 51
Value of fixed assets of fish processors by region

TABLE 52
Production costs of fish processors by region

TABLE 53
Permanent labour force of fish processing plants by region

The labour force of fish processing enterprises in the southern and central regions was much larger than those in the north. Forty-four percent of the enterprises in the south and 38 percent of the enterprises in the central region employ more than 321 perrmanent labourers.

5.3 Present use of credit

Fish processors as source of credit

While there were some differences between regions, fish processors in Viet Nam were not an important source of informal credit for their suppliers (Table 54). In the central region, two thirds of the fish processors did not advance cash to their suppliers in 2001 while the percentage of suppliers, which did not advance funds in the southern and northern region, was as high as 82 and 94 percent.

In cases where processors advanced cash to suppliers, most advances ranged from VND 41 100 000 to VND 500 000 000 (US$27 333-US$33 333). In a few cases in the southern and central region fish processors advanced larger amounts to suppliers in the range from VND 2 000 million to 60 000 million. There were also a few cases where suppliers advanced smaller amounts in the range from VND 60 000 to VND 16 000 000 (Table 55).

Cash loans for investment purposes and sources of credit

The scale of borrowing in the three regions was in keeping with the size of the fish processing operations. Self-financing was highest in the southern region, followed by the central region and the northern region (Table 55).

When comparing the amounts of self-finance with the present value of assets, it seemed that in most cases, the amount of self-finance was equal or even higher than the present value of the fixed assets. In addition loan financing of capital investment in fish processing also played a role, the fact that self-financing was as high or higher than the present value of the assets. This was probably due to depreciation of the fixed assets, the present book value of which must be considerably lower than the original investment.

The role of credit financing of capital investment in fish processing, was quite different from that in capture fisheries, aquaculture and fish wholesale enterprises.

The use of institutional credit for financing capital investment was less common than in capture fisheries but more common than in fish wholesaling. About one third of all respondents took a loan during the last three years to buy fixed assets for fish processing.

Regionally, the use of institutional credit by fish processors was more common in the central region than in the other two regions.

As can be seen from Table 53, about two-thirds of the respondents in the central region have taken a loan from a financial or other institution during the last three years for financing fixed assets for their fish processing enterprises while only 39 percent in the south and 14 percent in the northern region did so.

TABLE 54
Financial advances by fish processing enterprises to their suppliers

TABLE 55
Self-financing of capital investments by fish processors by region

Table 57 shows the amount of loans borrowed in the three regions over the last three years for purchasing of fixed assets. Loan sizes in the northern region were smaller than in the other two regions. Large loans ranging VND 20 000 to 35 000 million (= US$333 333-2 333 333) were taken by 11 percent of the borrowers in the south and 8 percent in the central region. In addition to institutional credit, informal credit was also used to finance fixed assets of fish processing enterprises (Table 58). In 29 percent of all cases in the north and 43 percent in the central region, credit for capital investment purposes was obtained from informal sources such as relatives and friends. The amounts obtained, however, were probably smaller than the ones obtained from financial institutions.

Among the financial institutions, which provided credit, state-owned financial institutions were the main sources followed by VBARD and DAF.

Capital assets financing by fish processors was different to capture fisheries, where VBARD emerged as the most important financial institution providing credit. Another difference was that informal sources of credit from relatives and friends seemed to play a greater role than in capture fisheries.

Cash loans for working capital needs and sources of credit

Self-financing of working capital was highest in the southern region, followed by the central region and was lowest in the northern region (Table 59). This finding was in keeping with the larger scale of operations and investment in fish processing plants which were mainly located in southern and central regions.

In the north, almost two-thirds of fish processors used less than VND 15 million of their own funds for financing the working capital needs over the specified period, i.e. VND 200- 9 073 million (=US$13 333-604 866) (Table 59). In the southern region, about two-thirds of processors used as much as VND 1 108-170 000 million (= US$73 866-11 333 333) for financing working capital needs.

TABLE 56
Loan financing of fixed assets by fish processors by region

TABLE 57
Institutional credit for capital investment in fish processing by region

TABLE 58
Source of credit for capital investment used by fish processors by region

TABLE 59
Self-financing of working capital of fish processors by region

The use of credit for financing working capital needs was more common in the central and southern region of Viet Nam. In total 43 percent of processors borrowed money during the last three years for financing their working capital needs. Taking a loan to meet working capital needs was not a common practise in the northern region. In the central and southern regions, however, slightly less than half and more than 60 percent of the processors, respectively, took working capital credit during the last three years (Table 60). The largest loans were taken in the southern, followed by the central region (Table 61).

In the northern region, VBARD and state-owned commercial banks provided loans of varying amounts for working capital purposes.

In the central region, state-owned commercial banks and VBARD provided most of the working capital loans but the Development Assistance Fund, private banks, mass organizations and the Social Policy Bank (SPB) also provided loans. In addition, informal lenders such as friends, business partners, relatives and moneylenders gave loans.

In the southern region, the bulk of working capital credit was provided by stateowned commercial banks. Loans were also given by VBARD, private banks, mass organizations and by relatives.

TABLE 60
Use of credit for working capital needs by fish processors by region

TABLE 61
Credit for working capital needs of fish processors by region

Overdue loans

Overdue loan repayment was not stated as a problem in the northern and the southern region, while almost one-fifth of fish processors, who had taken loans in the central region, reported their loan repayment as overdue. The main reason given for overdue loan repayment was poor market demand.

5.4 Future credit needs and sources

Forty-one percent of all fish processors interviewed during the survey planned to expand their businesses. There are considerable regional differences though. Fish processors saw by far the biggest scope for business expansion in the central region, where a clear majority of processors, i.e. 62 percent planned to expand their businesses. Almost half of processors in the southern region i.e. 47 percent planned to expand their fish processing activities. The exception is the northern region, where only 19 percent envisaged an expansion of their business activities.

When comparing fish processors with fishers, fish wholesalers and fish farmers, the fish processors saw opportunities for expansion of their business most positively, particularly in the central but also in the southern region of Viet Nam.

As far as the volume of investment is concerned that is needed to expand their businesses, this ranges from VND 25 to 2 000 million (US$1 667 to 133 333) in the north, from VND 4 to 14 700 million (US$267 to 980 000) in the central region and from VND 1 to 60 000 million (US$67 to 4 000 000) in the southern region.

The investments envisaged to be undertaken were in the following areas: construction of new processing plants, construction of bigger and more modern tanks and containers, construction of workshops, expanding production processes and turnover, construction of new and additional cold storages and freezers, purchase of ice making machinery, purchase of insulated trucks, improving and expanding general infrastructure and manufacturing/processing area, improving storage facilities and equipment, increasing working capital, purchase/construction of fish farms, purchase/construction of new/more fishing vessels, construction of new facilities, which meet HACCP standards, upgrading of equipment, purchase of more raw material and upgrading of office facilities.

The wide range of type and size of investments envisaged reflects the wide variety of sizes and scales of fish processing enterprises in Viet Nam. It also suggests that various types of financial institutions could possibly become involved in meeting the investment needs for fish processing in Viet Nam because of the different amounts of loans needed and the different size and type of businesses involved ranging from small household owned micro-enterprises to large equitized, privately owned or stateowned enterprises.

TABLE 62
Assessment of accessibility of credit sources by fish processors (%)

5.5 Perception of accessibility of credit

When comparing the accessibility of the various sources of credit, the following picture emerges (Table 62).

Moneylenders were seen as the most easily accessible sources of credit followed by VBARD, state-owned commercial banks, private banks and informal sources of credit. NGOs, international GOs, People’s Committees, SPB, cooperatives and mass organisations were seen as the least easily accessible sources of credit.

It is also interesting to note that more fish processors found VBARD and stateowned commercial banks easily accessible than difficult to access.

Among the difficulties of obtaining credit, complicated and lengthy lending procedures and limited loan amounts ranked highest. Lack of collateral is also sometimes mentioned as a reason why it is difficult to obtain loans from financial institutions.

When comparing the perceptions of fish processors with those of wholesalers and fishers, fish processors viewed VBARD, state-owned commercial banks and private banks as being more easily accessible for their credit needs. They viewed SPB, non-financial organizations and informal sources of credit as less accessible than fish wholesalers.

5.6 Conclusions and recommendations on meeting credit needs of fish processors

The demographic findings on gender, age and educational levels of fish processors suggest that managers and owners of fish processing enterprises are sufficiently educated to understand loan agreements and conditions as well as loan disbursement and repayment schedules. In terms of their general educational level, they seem to be sufficiently qualified to manage their fish processing enterprises.

As far as gender is concerned, financial institutions should be aware when appraising loan applications that fish processing in Viet Nam is not an exclusively male dominated activity and that there is a substantial number of women who manage/own fish processing enterprises. Thus, public and private financial and non-financial institutions should make sure that women also benefit from credit programmes for fish processing.

When comparing fish processors with fishers, fish wholesalers and fish farmers, fish processors see opportunities for expansion of their business most positively, particularly in the central but also in the southern region of Viet Nam.

The investments envisaged to be undertaken are in the following areas: construction of new processing plants, construction of bigger and more modern tanks and containers, construction of workshops, expanding production processes and turnover, construction of new and additional cold storages and freezers, purchase of ice making machinery, purchase of insulated trucks, improving and expanding general infrastructure and manufacturing/processing area, improving storage facilities and equipment, increasing working capital, purchase/construction of fish farms, purchase/construction of new/more fishing vessels, construction of new facilities which meet HACCP standards, upgrading of equipment, purchase of more raw material and upgrading of office facilities.

The wide range of type and size of investments envisaged reflects the wide variety of sizes and scales of fish processing enterprises in Viet Nam. It is recommended that various types of financial and non-financial institutions in Viet Nam should possibly become involved in meeting the investment needs for fish processing in Viet Nam because of the different amounts of loans needed and the different size and type of businesses involved ranging from small household owned micro-enterprises to large equitized, privately owned or state-owned enterprises.

Moneylenders are presently seen as the most easily accessible sources of credit followed by VBARD, state-owned commercial banks, private banks and informal sources of credit. At the other end of the spectrum, NGOs, international GOs, People’s Committees, SPB, cooperatives and mass organizations are seen as the least easily accessible sources of credit. The latter institutions should probably make special efforts to improve their accessibility and meet the credit needs of fish processors in Viet Nam.

Among the difficulties of obtaining credit, complicated and lengthy lending procedures and limited loan amounts rank highest. Lack of collateral is also sometimes mentioned as reason why it is difficult to obtain loans from financial institutions. Financial and non-financial institutions in Viet Nam should make special efforts to streamline their lending policies and procedures to meet the special requirements of fish processors.

Technical assistance in the formulation of lending policies and procedures for fish processing may be requested from FAO and others.

6. CREDIT NEEDS AND USE OF FISH RETAILERS

6.1 Demographic characteristics of fish retailers

According to the sample, fish retailing seems to be a female dominated activity in Viet Nam as can be seen from Table 63.

The most common age bracket of fish retailers in Viet Nam was the one between 31 and 40 years followed by the one between 41 and 50 years. Female retailers seemed to be slightly older than their male counterparts.

6.2 Occupational characteristics of fish retailers

The overwhelming majority of fish retail businesses represented in the sample were private households. Other forms of businesses such as private companies, group enterprises and state-owned enterprises only played a minor role as can be seen from Table 65.

Most of the fish retail businesses owned by private households were located and operated in local markets (51 percent). The second most common locations were big cities (21 percent), followed by district towns/headquarters (13 percent) and regional market centres (12 percent). The remainder operated in villages and along highways.

All private fish retail enterprises in the sample operated in big cities. The stateowned enterprises operated fish stalls in supermarkets while the group enterprises operated in local markets, regional markets and district towns.

Fish retailing was an important economic activity for the households and enterprises, which engaged in this activity. In 44 percent of the cases, it was the only income generating activity of the household. In only one-fifth of the cases did it account for less than 50 percent of the household income.

TABLE 63
Gender of fish retailers

TABLE 64
Age of fish retailers by gender

TABLE 65
Ownership pattern of fish retail businesses

TABLE 66
Own funds of fish retailers invested in fixed assets

TABLE 67
Own funds of fish retailers invested in fixed assets by region

6.3 Present use of credit

Outstanding cash loans and sources of credit

Table 66 shows how much the fish retailers included in the sample have spent from their own funds for purchasing their fixed assets. Own investments in fixed assets ranged from very small amounts up to VND 80 million (=US$5 333). The median class of investment was VND 1.7 to 3 million (=US$113 - 200).

Differences between regions are shown in Table 67. The figures suggested that own investments in fixed assets by fish retailers were largest in the centre, followed by the south and smallest in the northern region.

To borrow money for the purchase of fixed assets used for retailing of fish was much less common than in the case of fishing, wholesaling and processing

Only 14 percent of the respondents took a loan in the year of the study for purchasing fixed assets. There were considerable differences between the regions though. Borrowing was more common in the south, where 22 percent of the respondents took a loan and in the centre, where 14 percent of the respondents took a loan than in the north, where only 5 percent of the respondents borrowed money for the purchase of fixed assets.

The size of the loans covered a wide range from very small amounts up to VND 30 billion (= US$2 000), except for one case, the state-owned enterprise, where a larger amount of loan was taken.. Loans taken by fish retailers in the central region were generally larger than those in the northern and southern region.

The most important sources of loans were VBARD and the Viet Nam Bank for the Poor. Few loans were given by state-owned and private commercial banks.

Overdue loans

Three percent of the respondents admitted having had overdue loans during the last three years. This is a high percentage considering the fact that borrowing is not very common among fish retailers. Two-thirds of those who did not repay their loan in time gave as a reason a lack of demand for their products and too much competition from other fish retailers.

6.4 Future credit needs and sources

At the time of the interview, 10 percent of the respondents were planning to expand their fish retail business. This was the case in all regions. The percentage of retailers who planned to expand their businesses was noticeably smaller than percentages of fishers, fish processors and wholesalers, who planned to expand their businesses.

The amounts envisaged to be invested for business expansion were small, not exceeding VND 20.5 billion (=US$1 367), and meant for advertisement, procurement of aerators, baskets, tanks, insulated boxes and containers, diversification of products (dried fish, farmed fish etc.), increase of turnover, increase of working capital, procurement/rent of shops and trading outlets, improvement of product quality, procurement/rent of storage facilities and purchase of transport vehicles. In most cases, fish retailers planned to fund their business extension plans with their own resources rather than through borrowing from formal or informal financial institutions.

6.5 Perception of accessibility of credit

Of all players in the Viet Namese fishery sector covered by the study, fish retailers had the most negative perception of the accessibility of financial institutions as can be seen from Table 68. This goes hand in hand with another finding of the study, i.e. fish retailers make less use of institutional credit facilities for financing their enterprises than other actors.

The reasons for these findings are probably that fish retailers have less collateral than other groups, lower incomes and less valuable assets, and their credit needs are more for working capital and less for fixed assets, making them less attractive and more risky customers for traditional financial institutions. The difficulties of accessing institutional credit were seen as too complicated and lengthy lending procedures, too strict collateral requirements and a lack of trust. As far as informal sources of credit, in particular moneylenders, were concerned, high interest rates were seen as a major obstacle.

6.6 Conclusions and recommendations on meeting credit needs of fish retailers

Fish retailers had the most negative perception of the accessibility of financial institutions. This goes hand in hand with the fact that fish retailers made less use of credit for their enterprises than other actors. Their business expansion plans seemed to be restricted by their limited access to institutional credit.

Fish retailers will have to play a crucial role in the future development of domestic fish marketing and ensuring food security as they are the final link with the consumer. It is strongly recommended to make efforts to improve their access to institutional credit. Taking into account their credit needs in terms of volume of credit, loan size and term of loans and repayment period, VBARD and SPB are probably the best suited institutions to meet the needs of fish retailers.

Credit support should focus on retail enterprise development, on improving the economic efficiency of fish retailers, on improving the nutritional quality and safety of the fish products, which are being retailed and on improving fish supplies also to areas and people, which have not been adequately reached previously, including areas in remote locations.

As fish retailing is to a large extent done by women, enhanced credit and investment support would also make a strong contribution to enhance gender equality in the fisheries sector of Viet Nam.

TABLE 68
Assessment of fish retailers of accessibility of credit sources (%)

Considering further that fish retailers are probably the economically weakest economic group in the fisheries sector, improving their access to credit would also make a strong contribution to poverty alleviation in Viet Nam.

Technical assistance may be requested from FAO and other agencies and donors for the formulation of lending policies and schemes including microfinance programmes, which suit the need of this fishery subsector. Seed funds for lending may be sought from donors.

7. DATA REQUIREMENTS AND SOURCES FOR A DATABASE/MANAGEMENT INFORMATION SYSTEM ON FISHERIES CREDIT IN VIET NAM

The following information on fisheries credit is to be included in a database/management information system and to be updated on an annual basis

• list of financial institutions in Viet Nam, which provide credit for fish marketing and production (to be obtained from Ministry of Finance and through directly contacting financial institutions);

• list of Government bodies such as central, provincial and municipal People’s Committees and other Government bodies, which provide credit for fish marketing and production in Viet Nam (to be obtained from Ministry of Finance and through directly contacting financial institutions);

• lending policies for each of the above institutions/bodies (from concerned institutions/Government authorities): target group/eligibility for loan; purpose of loan/items to be provided;

• lending procedures for each of the above institutions/bodies (from concerned institutions/Government authorities): maximum loan amounts available; repayment periods, modalities/schedules; interest rates and charges; collateral and equity contribution requirements; loan documentation/certification;

• total number of loans disbursed annually and total amount disbursed for each of the above institutions/Government authorities (from concerned institutions/Government authorities);

• total loan amount overdue in relation to total loan amount outstanding for each of the above institutions/Government authorities (from concerned institutions/Government authorities);

• list of publications on fishery credit in Viet Nam including demand and impact assessments.