Improving Agricultural Value Chain Financing: A Case Study of Seng Cu Rice Chain in Lao Cai Province, Vietnam

Bui Thi Lam,Le Thi Thanh Hao,Philippe Lebailly,Tran Huu Cuong

doi:10.31817/vjas.2020.3.3.05

Abstract

Nowadays, the value chain financing (AVCF) is considered as an effective agricultural financing approach in the world, however, its prevalence is still limited in developing countries, like Viet Nam. This paper analyses the financial gap between the demands and the actual credit obtained of the Seng Cu (SC) rice chain participants in Lao Cai. Cross-sectional data were collected from 160 face-to-face interviews with SC rice producers and from in-depth interviews with 31 other stakeholders involved in the chain (demand-side) and the representatives of district-branch banks (supply-side) in 2016 - 2017. Overall, almost chain actors had high financial demands, especially upland rice producers and the leading chain actor (TPC). However, they faced many credit constraints related to the strict risk-avoidance strategy and the collateral requirement of banks. Even the SC rice chain confirmed its high potential and many supportive linkages among them developed, the decision-making of banks on credit disbursements still depends on the individual capability of each chain actors, not the entire chain. Thus, the recommendations for policymakers, producers, and agribusiness are suggested to enhance the financial sources going in the chain and the effectiveness of chain actors in the locality.

Highlights

In recent years, the studies on agricultural value chain financing (AVCF) have become strangely attractive because of their effectiveness in many fields, includingBui Thi Lam et al (2020)economics, society, and environment
Main actors participating in the Seng Cu rice value chain consisted of: (i) producers; (ii) input suppliers; (iii) small collectors; (iv) large collectors (Tien Phong Cooperative: TPC and others); and (v) retailers
Each chain player had specific credit demands depending on their available cash accumulation/equity (+) and costs required from their economic activities in the chain (-)

Summary

Introduction

The studies on AVCF have become strangely attractive because of their effectiveness in many fields, includingBui Thi Lam et al (2020)economics, society, and environment. AVCF encompasses the flow of products, finance, agricultural knowledge, and market information from producers to consumers. Coates et al (2011) suggest that the most suitable model for agricultural development is to approach the sector by sub-sectors and meet tailor-made financial needs throughout that specific value-chain. The comprehensive valuechain approach might be the more inclusive and increased breadth and depth of agricultural finance (Miller & Jones, 2010). This approach provides tailored services and products along a specific value chain in order to reduce the financial cost and risk, enhance the effectiveness of the chain actors as well as increase the competitiveness and sustainability of the whole chain (Miller & Jones, 2010; Miller, 2012; AfDB, 2013; HLPE, 2013). Under the AVCF approach, small farmers are likely to gain greater benefits and fewer risks (Miyata et al, 2009; Saigenji & Zeller, 2009; Olomola, 2010; De La O Campos et al, 2018)

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