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close this bookFinancial Systems for Rural Development (GRET)
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View the documentAppendix 1: Presentations by Delegation Heads
View the documentAppendix 2: Summaries of NGO Presentations

Appendix 1: Presentations by Delegation Heads

Address by Mr. Bousbong Souvannavong, Governor of the Bank of Lao PDR at the Opening Ceremony of the Seminar

Ladies and Gentlemen, Lao and Foreign Delegates,

First of all, I am pleased to welcome the delegates from Vietnam, the Kingdom of Cambodia, and Myanmar as well as the representatives from the international and governmental organizations, and banks.

Our Party, our Government, our Army and our people as a whole are hard at work in view of obtaining good results for celebrating the 20th anniversary of the Lao People's Democratic Republic which will take place in the very near future. Within this framework, it is my honor to represent the Lao PDR government and the Lao PDR Bank who organized this seminar with the cooperation and assistance of the C.C.L., IRAM and GRET.

This is the first time that the Lao PDR Bank has, with the cooperation of NGOs, organized a seminar on the regional level with the participation of Lao representatives and representatives from neighboring countries such as Vietnam, Cambodia and Myanmar. This seminar will last 3 days, from October 30th to November 1, 1 995.

The goal of this seminar is to exchange experience and learn some lessons about rural credit systems and savings mobilization. A longer-term goal is to help farmers become more autonomous and self-sufficient by means of financial support and to promote the setting-up of capital to increase production and gradually improve the rural population's standard of living.

Honorable Ladies and Gentlemen, I am familiar with and understand the organization of the rural credit and savings system which has been adopted in Vietnam and Cambodia and I think that this system is a potential factor for making farmers autonomous and self-sufficient by allowing them to acquire capital that they will use for production without having to wait for Government subsidies or foreign aid.

In Lao PDR, we have also organized a rural credit project, since the beginning of the implementation of the New Economic Mechanism, in view of supplying financial services to farmers throughout the country. In June 1993, the Government decided to create the Bank for Agricultural Promotion to supply financial services to farmers. A representative from the Bank for Agricultural Promotion will give you more details concerning these activities.

Therefore, during this seminar, I hope that the defecates will have the opportunity to hear some reports and exchange experiences. This exchange should enable us to obtain specific advice for the implementation of actions in the near future.

I would like to take this opportunity to wish the seminar success in this relaxed atmosphere. I would also like to wish all the Lao and foreign delegates good health and outstanding results in their research and exchange.

I now declare this seminar officially open...Thank you.

Summary of presentation by Mr. Tea Eav Ho, Director of the Committee of Decentralized and Rural Credit of Cambodia

A quick review of Cambodia's geography and recent history will make it easier to understand the development of rural credit in Cambodia:

Cambodia is a country covering 180,000 square kilometers, neighboring Laos, Vietnam and Thailand. It has a population of approximately 10 million.

The country was left weak and drained by several years of war. All the infrastructures were destroyed, the human resources reduced and the State institutions had become fragile. The Paris Agreements of October 31, 1991 brought about peace and led to the organization of free, democratic elections in May 1993 and the formation of the current royal government. These past two years of peace have enabled the government to work in a favorable environment with the support of International Organizations.

This recovery can be seen in the inflation rate that dropped from 123.3% in 1993 to 18% in 1994 and is expected to be about 10% in 1995. Private investments surpassed 2 billion after a law concerning the investment code was passed in August 1994. Public investments for the rehabilitation of the country's infrastructures went from 30 million dollars in 1993 to 125 million in 1994. In spite of these efforts and this recovery, Cambodia is still a poor country. The yearly income per person is $240. Eighty-five percent of the population lives in rural areas, hence the government's priority to emphasize rural development. With the support of International Organizations, Cambodia has set up its National Programme for Recovery.

Once again a State in its own right after its recognition by the International Organizations, to ensure its development, Cambodia must develop its human resources. It must ensure its budgetary balance, economic and financial stability and develop its economic infrastructure.

As far as rural credit is concerned, Cambodia counts on NGOs and International Organizations for development since currently only 2.5% of the population has access to credit. It turns out that these operators have very different concepts of work. To harmonize rural development and give the government a means of operating, the Credit Committee for Rural Development CCRD) was created, financed by the Caisse Francaise de Developpement (French Development Bank- CFD) and the UNDP.

Its job is to define a rural credit policy for the government, suggest a legal framework {as there are no regulations concerning the setting of interest rates, the creation of institutions, etc.), develop training, assist and coordinate the operators who work in this field and find ways and means of increasing the capital of the credit made available to the population. This job is done in collaboration with technical operators. At present, the funds being used for credit come solely from International Organizations and NGOs; the goal is to mobilize private investments on a long-term basis. Cambodia does not always want to count on this aid, hence the need to institutionalize the structures and to try to mobilize the country's internal savings or resources

This is a general outline of rural credit in Cambodia.

Presentation by Mr. Cam Hieu Kien, Vice-Director of the Vietnam Bank for Agriculture

Ladies and Gentlemen,

The Vietnam Bank for Agriculture is a state owned commercial bank. It has 53 agencies in the provinces, approximately 500 in the districts and over 1200 offices in the communities. Its banking activity especially targets agriculture, forestry and fishing.

Since 1991, the management of this bank has followed the rules of the market by applying an interest rate that must enable it to create equity by taking into account inflation which swings between 10 and 14% per year.

From 1991 to 1994, the government guided the policy of the Vietnam Bank for Agriculture as follows:

- block the repayment of unpaid loans prior to 1991, which represents approximately 1500 billion dongs

- enable the BAV to have larger margins by decreasing the taxes collected by the State. This is an advantage in comparison to the other state owned commercial banks.

- the capital of the BAV was brought by the National Bank at an interest rate lower than that granted to the other banks so as to enable it to have more resources for its future operations.

Given these advantages, the BAV brought together conditions favorable for carrying out credit operations successfully and rapidly achieving transformations of investment modes.

Before 1990, loans to the private sector only represented 65 million dongs out of 1500 billion. Currently, following transformations of the investment modes, the loans made to the private sector represent 70% of the total amount of credit operations. Out of the 10 million families in rural areas in Vietnam, 5 million have already benefited from credit operations.

The government has different ways of helping the farmers:

- Agricultural development projects, training of farmers in modern agricultural techniques, breeding and fishing ( shrimp breeding, fish farming, etc.).

- Distribution, for long periods, of land and forest to farmers to make them settle and motivate their agricultural activity.

- Forest development projects, reforestation operations of land left fallow and still untouched mountainous areas. The State supplies seeds and plants, as well as a salary to those who reforest. The State also grants loans at 0% or a reduced rote.

- Exploration policy of new economic fields. The State subsidizes people who farm new land as well as the construction of infrastructures ( roads, electric plants, irrigation systems, schools, hospitals, drilling, etc.) by granting tax exemptions on farm products for 3- to 7- year periods.

- Policy of rescheduling loan payments for farmers having been victims of natural disasters.

The Vietnamese government is also carrying out several major projects |coffee, sugar cane, mulberry trees, silkworm breeding, etc.) These projects are financed by the State budget and bank loans. The goal is to build an economic network backed by modern technology in cooperation with the State industrial sector which should allow the State and the farmers to improve their incomes.

As far as nomadic ethnic groups are concerned, the Government's policy is to invest in the setting up of small irrigation systems, assign new land, build schools, infirmaries and water reservoirs to influence settlement. The government is committed to purchasing rice from farmers at the market price and supervising the cost of feed for animals.

I would like to explain all the projects carried out by the government with the Vietnam Bank for Agriculture and the farmers so that you will be able to clearly understand that the conditions are very favorable for the development of the BAV and why we wanted to develop credit activities quickly. For credit, we divided the "private" families from the rural regions into two categories:

- Category 1 includes families who make their living from farming, fishing and forest activities. The bank conducted a survey to determine, based on the family's production capacities and standard of living, the possible size of the loan. For families who want to borrow less than 1 million dongs (approximately US $96), no guarantee was required. We distributed a credit passbook to each family that contains some administrative information (i.d. card number of the family head, his/her photograph) certified by the local (community) authority. Each time the family wants to borrow money, it must bring its passbook accompanied by a written request. The BAV generally grants a loan rapidly. If a family from this category requests a loan between 1 and 10 million dongs ($US 960), it must simply justify the use of the funds in compliance with the goal mentioned when the credit was subscribed. The bank later controls the use of the funds. If the loan is over 10 million dongs, the family has to offer guarantees.

- Category 2 includes families whose activity is commercial or non-agricultural.

For these families, whatever the amount of the loan, they must sign a contract with the BAV and present collateral. The BAV can grant loans to State businesses such as cooperatives, local bank branches, rural credit unions so that they can disburse credit directly to the farmers. This form of indirect credit represents approximately 20% of the amounts loaned and "relieves" the BAV. This type of operation is limited since the relay structures do not have sufficient guarantees for absorbing more credit operations.

The BAV can also grant loans to recognized, well-known structures or people such as the Women's Federation, a farmers' association, a religious master, an ethnic group's wiseman (respectobility is therefore a form of guarantee). The structure must also hove a certificate from the local authority.

Recently, some groups declined their responsibility by disbanding before the debts of their members were paid.

Since March 1995, the BAV has established credit unions for impoverished farmers. The initial capital was 400 billion dongs. There is a communal committee that determines which families are poor and gives a list to the bank ( the committee is called the Committee for the Fight against Hunger and Poverty). These families can apply for credit up to 2.5 million dongs over a three year period without a guarantee and with an interest rate of 14.5% per year.

Currently in Vietnam, there is a "Bank for the Poor" specialized in credit for the most impoverished but all the existing banking institutions can also offer credit to the poor. This is the case of State-owned commercial banks {such as the Vietnamese Bank of Industry and Trade, the Vietnamese Bank of Investment and Development, the Vietnamese Bank of Foreign Trade), private banks, and the system of credit unions. There is also the work of certain NGOs who are authorized to offer credit to farmers. The leaders in this field are the IFAD and the Programme Fleuve Rouge.

The BAV is in a good position in the field of credit for the poor since it made 95% of its loans to farmers over the past 4 years. They were essentially short-term loans. The BAV has participated actively in agricultural development. In the past, Vietnam was indeed lacking in rice, whereas today it exports more than two million tons a year and is the third exporter worldwide. It also exports coffee and fishing products for over one hundred million US dollars a year.

Vietnam has taken agricultural production seriously since 80% of its population are farmers. The Vietnamese government is continuing the development of its rural and agricultural policy through the construction of the rural financial network which meets the market regulations under State supervision and is in compliance with the socialist way of making the people rich, the country strong and society fair and modern. The model of the rural financial system in Vietnam is made up of the following organizations:

1 - The Vietnam Bank for Agriculture ( the State-owned Commercial Bank)
2 - Rural Banks
3 - People's credit fund
4 - the Bank for the Poor
5 - the Farmers' Subsidy Union (Farmers' Association)

We trust the rural financial system of Vietnam and will actively participate in and carry out the Vietnamese government's agricultural policy victoriously.

Presentation by Mr. Ohn Lwin, Deputy General Manager of the Myanmar Agricultural and Rural Development Bank

Mr. Chairman, Distinguished Guests, Ladies and Gentlemen,

It is a pleasure indeed to have this opportunity to meet so many prominent and distinguished delegates rendering their services for rural development.

First of all, let me introduce myself as U Ohn Lwin, a Deputy General Manager, a delegate who represents Gret/MARDB of Myanmar.

At least some of you know that MARDB is a bank in Myanmar dealing with agricultural credit for rural development. MARDB is a very old state owned bank being the successor to the State Agricultural Bank established in 1953. Headquarters in Yangon, capital of Myanmar, administered by a board of directors appointed ax-officio from relevant ministries. With a countrywide network of 14 regional offices, 169 township branches and 44 agency offices with over 3 thousand banking staff, it covers all agricultural areas spread all over the country.

MARDB's grass-root level organizations are the village banks. A total of 12280 Vbs are formed as the basic units for channeling agricultural credit. Vbs are also autonomous legal entities with over 3 million farmer members.

In July 1990, the new Bank Law was enacted giving our bank a broad mandate to effectively support the development of agricultural, livestock and rural socioeconomic enterprises. The authorized capital of our bank is K 1000 millions. Additional loanable capital is also made available by the Central Bank of Myanmar at a nominal charge. The lending rates and policy are also set by the government upon the proposal of the bank. The loan rates are occasionally defined by the Ministry of Finance and Revenue. We are authorized to provide loans to the state owned agricultural and livestock organizations, cooperatives, village banks, private persons, farmers, entrepreneurs and laborers.

In the financial year 1994-95, seasonal loans for 34 varieties of premonsoon, monsoon and winter crops were disbursed to the tune of K 2781 million for 1.7 million farmer members of Vbs. Short-term 12 to 4 years) and long-term (5 and above) loans were given for purchase of farm implements, draft cattle, bullock carts, water pump sets, power tillers for integrated paddy fish farming also for growing orchards and plantation. Current lending rate to Vbs is 13% and 5% is added for loan made by Vbs to members. Loan rates for each variety of crops, as well as each item of term loans are uniform throughout the country. The recovery rate on seasonal loans is 99.64% and above 100% on due installment of term loans.

All cultivators except defaulters can draw fresh loans and no applications are rejected for

Seasonal loans to farmers are provided through village banks on collective liability and no other collateral is sought. Term-loans to farmers are also channeled through village banks, two personal sureties for medium and long term loans. For Cooperative Society a charge on the asset of the society and related undertakings as well as a guarantee from the Ministry of Cooperative is required as surety. The main criteria for sanctioning a term loan is viability of the borrowers' business and the repaying capacity. The bank grants term loans only with security. The borrowers also have to pledge the cattle, carts and machines bought with loan proceeds.

Keeping with the Governments' priorities, MARDB recently introduced new term loans for the development of border area and national races who are replacing poppy fields with sugar cane, rubber plantation and livestock breeding. A sum of K 69.71 million was issued in Chin

State loan for orchards at interest rate 1% with special fund allotted by the government.

Starting from 1991-92, new types of loans are introduced to livestock breeders for 15 kinds of livestock, integrated paddy fish deep water farming, loans for solar salt production, for cultivation of mulberry to support sericulture, etc. we have disbursed term loans amounting to K 1,735,81 million to 39,270 farmer customers.

To attract the incremental income of farmers with voluntary saving deposit account and to offer emergency loans to farmers and rural populations, a rural saving programme was launched in October 1993. Under this programme, farmers and rural population are encouraged and organized to deposit their surplus income at the bank at 10% interest earning savings accounts. Depositors are allowed to borrow farm development loans up to 4 times of their deposit at 15% rate of interest. MARDB township staffs are also rendering mobile service to rural population countrywide. 0.6 million farmers save their surplus income opening bank accounts at their doorsteps. Up to 31.7.95 1,63 million farmers and rural population had opened saving accounts and deposited K 240,21 million.

After harvest, cultivation loans are recovered regularly and fully. Farm development loans and livestock breeding loans are also fully recovered in due time. As a successful bank, yearly progress in loan disbursement is made comparatively in line with good recovery.

Mr. Chairman, ladies and gentlemen, may I continue explaining about recent development in Myanmar?

As our country moved from the centrally planned economy towards a market oriented economic system, new bank law was promulgated by the government in 1990. The state-owned banks are reconstructed as the Central Bank of Myanmar, the Myanmar Economic Bank, Myanmar Investment and Commercial Bank, the Myanmar Foreign Trade Bank and MARDB Myanmar Agricultural and Rural Development Bank.

Under the new economic policy, other new laws were also passed opening opportunities for foreign and local entrepreneurs to set up joint ventures, private companies and businesses in order to engage in production, manufactures, trade and finance in many fields previously reserved for the state sector only.

In formal institution sector, in addition to MARDB, the state owned Farm Produce Trading now compete with cooperatives and joint venture companies to procure agricultural produce at market prices. They pay farmers cash advances on voluntary sale of standing crops. Private traders also buy standing crops and farm produce directly from growers. Rural people can also borrow money by pledging gold and jewelry at the shops operated by the Small Loan Enterprise in many towns. Some national and foreign investors set up commercial banks, companies and agencies. Farmers, however, continue to bank with MARDB which has been a banker rendering service to them for so many years and still offer loans without collateral and at very competitive interest rates.

Mr. Chairman, ladies and gentlemen, we sincerely hope that the outcome of this regional seminar will surely contribute to establish a suitable and sustainable rural finance system which will effectively support the rural development and the main objective of the GRET, CCL and IRAM will be fulfilled very soon. Also, I would like to express my sincere thanks to all responsible persons for holding this seminar here in Vientiane.

Good day to every one, Thank you very much.