Do Xuan Luan,

Thai Nguyen University of Agriculture and Forestry, Vietnam

E-mail: doxuanluan@tuaf.edu.vn

Formal credit inclusion within one-commune-one-product (OCOP) in the agricultural restructuring strategy of northwestern Vietnam

Diep Thanh Tung,

Tra Vinh University, Vietnam

Email: dttung@tvu.edu.vn

Abstract. Considering international experience, Vietnam has carried out the One Commune One Product program (OCOP) to produce specialty farm products and improve income for farmers. However, success of such programs depends heavily on relaxing credit access constraints for primary OCOP producers to be able to fulfil their investment. This paper applies a logit regression and data collected from face-to-face interviews with 482 farm households and relevant stakeholders in Northwestern Vietnam to explain the existence of credit gap between credit demand and supply. The results show that credit access constraints are quite common for cinnamon and bamboo farm households. The amounts of credit provided satisfied only part of households’ credit demand. Lack of valuable collateral in the form of residential houses and other fixed assets is the main factor explaining the shortage of bank credits. In addition, the proportion of farm households with bank accounts remains to be low, while convenient access to bank accounts improves household economy and facilitates access to bank credit. Redesigning the “one size fits all” bank credit policy is needed to be suitable for different OCOP programs. Moreover, promoting multiparty cooperation between banks and other actors can be a sustainable direction in connecting agricultural credit supply and demand.

Received: October, 2018

1st Revision: January, 2019

Accepted: May, 2019

DOI: 10.14254/2071-789X.2019/12-2/6

JEL Classification: A10, O12, Q14

Keywords: one commune one product, rural credit, northwestern Vietnam