Laws of Vietnam

Pursuant to the Law on Organization of the Government of September 30, 1992;

Pursuant to Vietnam State Bank Law No.01/1997-QH10 of December 12, 1997 and Credit Institution Law No.02/1997-QH10 of December 12, 1997;

At the proposal of the Governor of the Vietnam State Bank,

DECIDES:

Article 1.- To promulgate a number of banking credit policies in service of agricultural and rural development with the following contents:

I. CAPITAL SOURCES

1. The sources of capital for agricultural and rural development include:

- Capital mobilized by banks;

- The State budget capital;

- The capital borrowed from international and foreign financial institutions.

The capital sources shall be supplemented annually and assigned to the Vietnam Bank for Agriculture and Rural Development for use in service of agricultural and rural development, of which a reasonable portion shall be reserved as loans to the poor households through the Bank for the Poor.

2. The sources of capital for agricultural and rural development shall be mobilized by the following modes:

- Stepping up the mobilization of demand and time savings, the issuance of debentures, commercial bank bonds... in Vietnam dong, foreign currencies and even gold when necessary;

- Step and step diversifying the mobilization of medium-term and long-term capital for agricultural and rural development programs in each period. In the immediate future, in order to service the Government’s agricultural and rural development programs, the commercial banks may issue bonds with interest rates higher than the ordinary mobilization rate at the same time, which, however, must not exceed 1%/ year;

- The commercial banks, when mobilizing medium-term and long- term capital in gold, shall have to submit their plans thereon to the State Bank for approval; the State Bank shall have to convert the volume of mobilized gold into Vietnam dong;

- Trying to mobilize capital sources from overseas, including ODA capital and commercial loan capital. Quickly disbursing capital from two rural financial and credit projects, stage I, thus creating conditions for the stage II capital borrowing of about USD150 million to 180 million;

- In addition to the sources of capital mobilized by banks, the State shall annually transfer part of the budget capital to credit institutions to be used as loans for the implementation of economic programs in accordance with the State’s policies.

II. REGARDING THE CREDIT MECHANISM POLICY

1. For ordinary credits

a) The Vietnam Bank for Agriculture and Rural Development and other credit institutions shall mobilize enough capital to meet the requirement of increasing the credit volume for agricultural and rural development demand, including:

- The production costs of cultivation and husbandry such as supplies, fertilizers, plant varieties, animal breeds, insecticides, weedkillers, preventive and curative drugs, animal feeds...; the cost of aquaculture (fresh water and brackish water) such as the renovation of rearing fields and cages, breeds, feeds, preventive and curative drugs...; marine product fishing such as building and repairing ships and boats, procurement of fishing nets, petrol and oil, ice...; the cost of salt production; the costs of irrigation and drainage; building of interfield irrigation cannals.

- The consumption, processing and export of farm produce, forest, marine and aquatic products as well as salt;

- Developing rural industry, handicrafts, trades and services;

- The procurement of instruments, machinery and equipment in service of agricultural and rural development such as mechanical ploughs, mechanical harrows; mechanical pumps, harvesters; paddy threaders; rice huskers and millers, drying machines, processing equipment; insectiside sprayers...; the procurement of farm transport means; the construction of animal stables and farms, warehouses, drying yards, post-harvest preserving facilities;

- Developing rural infrastructure such as power supply networks, rural traffic roads, clean water supply, environmental hygiene.

b) Loan security mechanism

- For a household which is lent up to 10 million VN dong by a bank, the borrower shall not have to mortgage property but only have to file a loan application enclosed with the land use right certificate.

For a household doing commodity economy or farm economy, which is lent over 10 million VN dong, the borrower shall have to comply with the bank’s regulations on loan security.

- For production and/or business cooperatives, the credit institutions shall, depending on each specific case, apply one of the following forms:

+ Making loan security according to the bank’s regulations;

+ Using property of Management Board members as loan security;

+ Using the property created from the borrowed capital as loan security but the maximum lending amount is equal to the cooperative’s own capital.

- For enterprises

+ The State enterprises tasked by the State to act as main purchasers of rice for export and main fertilizer importers may use the property formulated from the borrowed capital as security for loans; for enterprises dealing in other products, the loan security shall comply with the bank’s regulations.

+ Other enterprises, when borrowing capital from banks, shall have to comply with the banks’ regulations on loan security.

2. Loans with preferential interest rates shall comply with the Prime Minister’s separate decision and the Law on Domestic Investment Promotion.

3. For kinds of credits lent under the State’s policies, such as:

- Loans to the poor households;

- Loans for overcoming consequences of storms, floods and other natural calamities;

- Loans for building or modifying fishing ships and offshore fishing services ships;

- Loans to other programs within certain scope in difficult areas and/or production/business lines and trades meeting with difficulties.

For loans provided under the State’s policies, the borrowers shall not have to comply with the regulations on loan security; in case of risk, the concerned bank shall report it to the Prime Minister for consideration and specific solution.

III. REGARDING LENDING TERMS

Banks shall provide loans according to the growth cycles of cultivated plants, reared animals, the time for circulation of supplies and goods and the depreciation of assets, machinery and equipment.

The short-term loan duration shall be 12 months at most;

The medium-term loan duration shall range from 12 months to 5 years;

The long-term loan duration shall be over 5 years.

IV. REGARDING THE SERVICE AND TRANSACTION NETWORKS OF BANKS

- The Vietnam Bank for Agriculture and Rural Development shall base itself on the credit volumes and financial capability to step by step expand its network (transaction establishments, working facilities) to effect the on-spot disbursement of capital, thus creating convenience for borrowers and meeting the service requirements; or it may entrust people’s credit funds and/or rural joint-stock commercial banks to act as agents performing some specific credit operations.

- Credit institutions are encouraged to participate in lending capital for agricultural and rural development. Other credit institutions, when participating in lending capital for agricultural and rural development, shall comply with this Decision.

- Credit institutions should improve the lending process with simple procedures.

V. HANDLING RISKS

In case of loss caused to loans lent for agricultural and rural development due to force majeure causes such as storms, floods, droughts, epidemics, the State shall work out policies to handle losses for the borrowers and the lending banks (debt cancellation, freezing or extension, depending on the extent of losses).

In handling the loss of each specific case, the Finance Ministry shall assume the prime responsibility and coordinate with the State Bank of Vietnam and the concerned local administration in examining the case and propose handling measures to the Prime Minister for Decision.

Article 2.- The State Bank of Vietnam and the Finance Ministry shall have to guide the execution of this decision.

Article 3.- This decision takes effect 15 days after its signing.

The ministers, the heads of the ministerial-level agencies, the heads of agencies attached to the Government and the presidents of the People’s Committees of provinces and centrally-run cities shall have to implement this Decision.

For the Prime Minister

Deputy Prime Minister