Directive No. 5/NH-CT on providing loans to expand agricultural and forestry development areas in midlands and mountainous regions

DIRECTIVE

DECISION NO. 5/NH-CT OF JANUARY 15, 1975 ISSUED BY THE STATE BANK OF VIETNAM ON LOANS FOR EXPANDING AGRICULTURAL AND FORESTRY AREAS IN MIDLANDS AND MOUNTAINOUS REGIONS

On May 25, 1974, the Council of Ministers issued Decision No. 129/CP stipulating policies for cooperatives expanding agricultural and forestry areas in midlands and mountainous regions.

To enable cooperatives to develop production and expand business, the State assigns each cooperative a certain area of land for cultivation, animal husbandry, and afforestation. These cooperatives include existing ones in midlands and mountainous regions, those and ethnic groups that must relocate due to settlement planning, and those from lowlands engaged in agriculture and forestry in midlands and mountainous regions. Simultaneously, while fully promoting the spirit of collective ownership, self-reliance, and self-strengthening of cooperatives, the State also provides additional capital (through interest-free loans and reduced-interest loans) to assist cooperatives in implementing plans to expand areas, develop business, and intensify farming, aiming to quickly stabilize living conditions, build strong and prosperous cooperatives, contribute to developing the national economy, and accelerate socialist industrialization.

Implementing the above decision of the Council of Ministers, the Central State Bank issues this directive on lending to the aforementioned cooperatives as follows:

 

II- SUPPORT MEASURES FOR STATE-OWNED AGRICULTURAL FARMS AND FORESTRY COMPANIES IN THE FIELD OF SCIENCE AND TECHNOLOGY

Cooperatives eligible for loans under Decision No. 129-CP of the Council of Ministers must be located in areas with approved planning schemes, either officially approved by the Standing Committee of the Council of Ministers or authorized by the Government, or in cases where the regional planning scheme has not been officially approved, it must have the approval of the Prime Minister to proceed.

After officially receiving land and forest from the State (with handover records), cooperatives must develop specific plans, clearly defining production directions for each type of land and forest received, establish plans to expand areas for production development and loan borrowing. All these documents must be unanimously approved by the members' congress (or the congress of member representatives) and accepted by competent authorities such as the Provincial People's Committee approving specific plans and production directions, the District People's Committee reviewing plans before submitting them to the State Bank for guidance.

2. The objects of long-term interest-free loans are costs for building terraced fields; planting industrial crops requiring significant investment: tea, pineapple, mulberry...; planting fruit trees, industrial crops, timber trees; caring for, protecting, and repairing existing forests; improving grasslands; constructing facilities serving production and public welfare.

The amount of long-term interest-free loans and the term of interest-free loans for each object and each cooperative shall be based on the amount of interest-free loans proposed by the provincial credit council and decided by the Chairman of the Provincial People's Committee for each agricultural and forestry region, but the maximum level shall not exceed the maximum loan amount specified for each object in Decision No. 129-CP of the Council of Ministers.

3. Cooperatives borrowing funds must fully implement the principles of socialist credit, including:

- Using borrowed funds for the purposes and objects specified in the credit contract, and only receiving funds gradually according to the implementation of the plan.

- Ensuring that borrowed funds are secured by equivalent material value, for example, expanding areas according to the planned technical procedures for each type of land and object, achieving high economic efficiency;

- Repaying borrowed funds on time. If it is an interest-free long-term loan, good economic-technical standards must be achieved to qualify for debt cancellation within the prescribed period; if it is a loan with interest, both principal and interest must be repaid according to the terms specified in the promissory note (or credit contract).

4. Cooperatives borrowing funds must be production units with legal personality recognized by the District People's Committee, maintaining clear accounting books and implementing unified accounting systems, opening accounts and depositing various types of capital at the Bank, and fulfilling all obligations to the State.

II. LONG-TERM INTEREST-FREE LOANS

Long-term interest-free loans are a form of State support for cooperatives assigned land and forests to provide additional capital to implement plans to expand agricultural and forestry production areas. If cooperatives produce and operate according to the State's planning and production direction, properly follow technical procedures, and achieve economic efficiency when entering production, they will be rewarded by the State through gradual debt cancellation, thereby increasing their own capital. Cooperatives that do not comply with regulations must return the borrowed capital to the State.

1. Loan Objectives

Based on the approved loan amount and term by the Chairman of the Provincial People's Committee, the bank branch shall focus on providing loans for factors directly creating asset values, including labor costs for direct construction work, materials for basic investment purposes such as seeds, fertilizers, lime..., depreciation costs of tools used in construction, so that cooperatives can complete the basic construction phase within the designated timeframe.

a) For the construction of terraced fields for growing staple food crops, food crops, and other short-term industrial crops, funds borrowed should be concentrated on factors such as labor costs for digging, filling, leveling... to create the area of terraced fields for sustainable production.

b) For expanding the area for planting industrial crops such as tea, pineapple, mulberry..., provide loans to cover costs for clearing land, making boundary roads, purchasing fertilizer and seeds; expenses for crop care; to create new planting areas with dense growth meeting technical standards and thriving green plants.

c) For expanding the area for planting fruit trees, industrial crops, timber trees such as coconut, banyan, mango..., provide loans to cover labor costs for land preparation, seedling planting, and regular care until the plants grow, thrive, and meet technical standards on the unit area during the basic construction period.

d) For caring for, protecting, and repairing existing forests, provide loans to cover costs for climbing plant propagation, compensating for labor costs for regular forest protection, aiming to form forest areas meeting forestry regulations.

e) For improving grazing pastures for large livestock, provide loans to cover costs for burning wild grasses, replanting, caring for, and protecting the pasture to achieve productivity and yield targets according to approved plans.

g) For amounts from 100 to 150 dong (only calculated per hectare of paddy fields, terraced fields, and newly planted long-term crops) to build production facilities and public welfare services such as drying yards, warehouses, collective animal sheds, public wells, kindergartens, broadcasting systems, cooperative headquarters, etc., concentrate funds on construction costs so that cooperatives can complete each project promptly and put them into use. This applies only to cooperatives of ethnic minorities who have recently moved to midlands and mountains and those who have just settled in the region, calculated from the area cleared and newly planted since May 25, 1974.

2- Loan methods

a) Branches and offices of banks base their approval of loan amounts on the basic construction investment plan and the interest-free long-term borrowing plan of the cooperative. These plans must be developed based on the land clearance and expanded production development plan and must meet the following basic requirements:

- The basic construction costs for each type of project (per unit area) listed in the plan must be calculated based on economic and technical norms.

- For the basic construction investment plan, it must balance the needs and actual capabilities of the cooperative regarding labor, materials, and capital (including self-owned and borrowed capital) for each project component, clearly identifying land clearance and new planting projects, unfinished projects carried over from previous years, projects to be completed and put into production within the planning year, and at least one subsequent planning year. It must include construction schedules, determining work volumes and cost requirements for specific time periods;

- For the borrowing plan, the requested loan amount listed in the plan must match the approved interest-free loan amount for each project component, reflecting the amount requested for land clearance and new planting, the amount requested to continue basic investment for unfinished construction projects, and the investment amount for projects to be put into production within the planning year. The loan usage period must be clearly defined to align with the basic construction plan.

b) Branches and offices of banks must assist cooperatives and participate in reviewing their planning and plans alongside agricultural, forestry, and local financial departments. If there are differing views between the Bank and these agencies during the review of loan amounts and terms, they must report to higher-level banks for consideration and discussion with relevant sectors to reach consensus before deciding on the loan.

c) After receiving notifications from the provincial administrative committee chairman about loan decisions and from the provincial bank about loan quotas, bank branches will base loan agreements (or credit contracts) on cooperative loan applications and accompanying plans.

- Banks will disburse loans to cooperatives according to the basic construction plan, with the principle of disbursing in installments, where the next installment is based on the inspection of the previous disbursement's use, thereby encouraging cooperatives to follow technical procedures and complete the basic construction plan on schedule;

- Banks may temporarily disburse loans based on the cooperative's work program for the period (possibly monthly), after which the bank will verify and adjust the disbursed amount, simultaneously setting the loan amount for the next period. The total amount disbursed during the basic construction phase should not exceed 70% of the planned loan amount for that phase, with the remaining 30% disbursed after inspecting the cooperative's construction results.

d) Acceptance of completed projects is a joint responsibility of agriculture, forestry, finance, and banking sectors. Once the cooperative completes the project according to specified standards, immediate acceptance must be conducted. Requirements include evaluating the quantity and quality of the completed project based on economic and technical standards, inspecting all basic construction costs and final accounts, and addressing violations of socialist credit principles.

A record of acceptance must be established to clearly define these issues, signed by members of the acceptance board and cooperative representatives. This record serves as documentation for debt cancellation reviews and monitoring the responsibilities of all parties (cooperatives, agricultural and forestry committees, banks, finance) regarding loan usage and project economic effectiveness.

3\. For the area of newly reclaimed land planted in 1974, which is still under basic construction and supported by local budget subsidies, if the local budget has provided sufficient capital according to the loan quota set forth in Decision 129-C P of the Council of Ministers, then the Bank will not provide additional interest-free loans. The cooperative shall resolve on its own to complete the basic construction and put the project into production as soon as possible. In cases where the capital provided is insufficient compared to the prescribed quota, this area will be considered for additional interest-free loans, but such decisions must be made by the Chairman of the Provincial People's Committee.

4\. Source of Loans

The long-term interest-free loans transferred from the central budget to the State Bank of Vietnam annually serve as the source of these loans. The Central Bank will allocate funds based on the annual reclamation expansion plans and the approved long-term interest-free loan plans of localities, which have been endorsed by the Government. Branches may only lend within the limits notified by the Central Bank. If additional capital is required to exceed the reclamation plan, branches must prepare additional funding requests to be submitted to the Central Bank for review and resolution.

5\. Loan Usage Inspection

The inspection of long-term interest-free loan usage follows the same principles and methods as those used for inspecting bank credit loans with interest.

Here, some points are emphasized:

a\. Inspections must be strengthened at each stage of the basic construction process, combining bookkeeping records with on-site completion volumes. Comparisons should be made between actual construction costs and plans, as well as between construction progress and plans, to implement measures that promote timely completion of the plan.

Depending on the requirements of each inspection round, inspection teams may be organized, including relevant sectors at the district level, or technical staff may be invited to participate. If cooperatives misuse loan funds or fail to follow technical procedures during inspections, a report must be prepared, recommendations made, and the cooperative required to make timely corrections.

b\. For cooperatives misusing loan funds, such as failing to adhere to planning and technical procedures, the Bank will temporarily suspend further lending and request timely intervention from the District and County People's Committees. Should the cooperative fail to correct the situation despite repeated interventions by local authorities, the Bank will recover the improperly used loan amount. The repayment period will be proposed by the Agricultural, Forestry, Finance Departments, and the Bank Branch, and decided upon by the Chairman of the County People's Committee.

6\. Debt Waiver Consideration

After cooperatives complete basic construction using long-term interest-free loans and achieve effective economic outcomes from the project, the branch will base its debt waiver recommendation on Decision 129-C P of the Council of Ministers and the quantity of products produced and sold to the state, as stipulated by the Provincial People's Committee, and submit it to the Provincial Credit Council for approval.

a\. For terraced fields producing staple crops and short-cycle food crops, once they are developed into sustainable production fields meeting average yield standards per hectare (converted to rice), the debt will be waived.

b\. For short-cycle crops and fast-turnover crops like tea, pineapple, mulberry, and grassland, once they are developed into sustainable production fields and begin following planned cultivation techniques, the debt waiver criteria will be based on the annual quantity of products sold to the state, gradually waiving the cooperative's debt.

c\. For long-cycle crops (timber, industrial, perennial crops), after successful new planting or improvement (ensuring survival rates, planting density, protection measures), half of the loan amount will be waived, with the remaining half being gradually waived based on the annual quantity of products sold to the state according to the plan.

d\. For loans ranging from 100 to 150 dong provided to cooperatives of ethnic minorities recently relocated to lowlands or settled in areas for additional capital to build production facilities and public welfare infrastructure, once confirmed to have constructed and purchased assets of equivalent value, the cooperative's debt will be waived.

Upon receiving the Government Council's decision to waive debt (or delegated authority), branches will compile lists of cooperatives eligible for debt waiver, the amount of debt waived for each cooperative, and submit two copies to the Central Bank. The Central Bank will transfer funds to branches to inform them to waive debts for each cooperative and individual. Simultaneously, branches must report the results of debt waivers to the Central Bank as required.

e\. Interest-free loans must be recorded in separate accounts. Therefore, in cases where external factors cause issues (such as lack of materials to secure the loan, natural disasters, frost damage, floods), or when higher authorities change production directions, these amounts must be recorded in a separate sub-account for tracking and submission to the Government for resolution. Branches and bank offices may only record unsecured loan amounts in this sub-account with confirmation from the Credit Council and approval by the Provincial People's Committee.

III\. INTEREST-BEARING LOANS

Besides long-term interest-free loans for expanding agricultural and forestry production, the State Bank also provides cooperatives with interest-bearing credit loans to increase capital for expanding business activities and intensifying production to boost productivity.

1. Loan Objectives

a\. Fixed Asset Loans:

Banks provide long-term loans with interest to cooperatives for building material and technical facilities serving production: small irrigation works such as constructing water channels for each field... purchasing fertilizers and lime to improve soil quality, buying breeding cattle and sows for collective animal husbandry, raising fish in ponds and lakes where conditions permit, expanding sideline businesses such as lime production, bricks, and processing agricultural products.

For cooperatives from other places newly established in new economic zones with little or no accumulated capital, members' living conditions are still difficult, if they expand the area of planting perennial cash crops with high initial investment costs such as tea, pineapple, mulberry..., and if the long-term loan capital without interest does not ensure the cooperative's self-reliance capability to complete basic construction plans, then the Bank may consider providing long-term loans with interest to enable the cooperative to have additional funds for crop fertilization during the basic construction period.

b) Working capital loans:

Banks provide short-term loans to cooperatives to supplement working capital to meet regular and seasonal production costs for various production and business activities within the cooperative.

2- Sources of Loans:

The sources of loans with interest invested in the above objects are included in the annual loan quota distributed by the Central Bank to its branches. To monitor the results of loans to new economic zones, separate accounts must be opened to record these loans.

3- Interest Rates on Loans

The interest rates on loans are applied according to the officially approved and currently implemented interest rate system, specifically following Circular No. 15/TT-NH dated December 15, 1969 explaining and guiding the implementation of Decision No. 108/TT-TTg dated October 6, 1969 of the Prime Minister, as follows:

a) The interest rate on long-term loans for existing cooperatives in the midlands and mountainous regions within new economic zones is applied at 0.21%.

b) The interest rate on long-term loans for cooperatives of ethnic minorities who have recently moved up from the lowlands and those settled in the region due to relocation policies, whose livelihoods are still unstable (during a shaping period of approximately 3 to 7 years), is applied at 0.18%. After this period, the unified interest rate of 0.21% will be implemented.

c) The interest rate on short-term loans is uniformly applied at 0.33% for all types of cooperatives.

4- Loans to Cooperative Members for Developing Family Side Businesses

In credit cooperatives that do not have or cannot handle loans for developing family side businesses, the State Bank will directly provide loans to member families, especially those from other places who have moved into the region, for livestock breeding such as pigs, cattle, and buffaloes in suitable areas, and for other handicrafts, but without affecting the management of labor in the cooperative, to increase the quantity of commodity products, raise the income level of members, and contribute to supporting collective economy.

5- Cooperatives and member families from the lowlands moving to build new bases under state policies, where land and forests are allocated, and financial support is provided for production and business activities of cooperatives and subsidies for members to build houses in new locations. Regarding their assets in their original hometowns, household heads have the right to transfer them to relatives or fellow members of the cooperative, village, or commune at prices agreed upon by both parties. The State Bank does not provide loans for compensating crop profits, purchasing assets, settling work points..., as was done for land reclamation loans previously.

IV- ACCOUNTING RECORDS AND LOAN PROCEDURES

1- Supplement Article 53. Accounting Analysis:

Add two sub-account classifications as follows:

- 06 "loans for expanding agricultural and forestry areas".

This sub-account classification is used to open account 616 for recording bank loans with interest for expanding agricultural and forestry areas in new economic zones;

- 07 "loans for expanding agricultural and forestry areas without interest".

This sub-account classification is used to open account 616 for recording bank loans using transferred budget funds for expanding agricultural and forestry areas without interest in the midlands and mountains.

2- Accounting Procedures for Loans and Debt Collection

a) Loans with Interest:

Loan procedures are carried out normally according to the current loan planning regulations.

When disbursing the loan, debit account 06616.

b) Loans Without Interest:

- The loan agreement is prepared according to Model 1CVM (current model for long-term loan agreements). On the agreement, stamp or write in red ink "no interest" at the top right corner of the front page and "write-off" on the top right corner of the back page;

- Each loan recipient has a separate loan agreement. The agreement must clearly specify the specific purpose of the loan usage and the capital amount per hectare. The final write-off term and the repayment plan terms are recorded on the back of the agreement in the "repayment plan" column;

- Interest rate, record "no interest";

- Each time the loan is disbursed, the borrower must sign the agreement. When disbursing the loan, record:

Debit: 07616 sub-account of the borrowing unit.

Credit: Appropriate account.

At the end of the day, the first-time loan agreements are recorded in account 9922.

When receiving funds from the Central Bank for write-off, record:

Debit: Corresponding account.

Credit: 07616 sub-account of the unit being considered for write-off.

The final write-off agreements are recorded in account 9922.

To implement the above provisions, branch managers and counters must thoroughly disseminate the spirit and content of this directive and accompanying guidance documents to relevant ministries, cooperatives, and related sectors. For counters handling long-term loans without interest, sufficient credit officers and accountants must be assigned to implement, strictly adhering to accounting, statistical, and reporting systems.

Close cooperation with related sectors at the provincial and district levels is required to effectively utilize investment capital and enhance the service and supervisory role of the State Bank towards cooperatives.

The Directors of the Agricultural Credit Department, the Economic Planning Department, and the Accounting and Finance Department are responsible for guiding specific operational aspects to implement this directive.

The previous regulations on loans for land reclamation, such as Circular Jointly Issued by the State Bank and the General Department of Land Reclamation No. 01-VP-259 dated February 12, 1965, and Directive No. 05-M-/59 dated October 28, 1965, guiding loans and debt collection for agricultural land reclamation cooperatives (according to Circular Jointly Issued by the Ministries No. 01-VP/M39), are all rendered invalid.