After more than 25 years of widespread implementation, Agribank’s lending model through lending groups has become a distinctive channel for bringing formal credit closer to people in rural and agricultural communities, including those in remote, border and island areas. Agribank currently provides loans through lending groups at 105 branches across 34 provinces and cities nationwide, with a network of nearly 60,000 groups, close to one million members and total outstanding loans exceeding VND 215 trillion. These figures demonstrate the scale and reach of a lending model well suited to the small-scale and geographically dispersed nature of production in rural areas.

In implementing credit policies for agricultural and rural development, Agribank has worked closely with socio-political organisations, particularly the Vietnam Farmers’ Union and the Vietnam Women’s Union at all levels, to ensure that capital reaches the right beneficiaries and meets their needs. Through lending groups, Agribank is better able to maintain close links with local communities and understand the specific needs of individual households, production models, and production and business plans. This is an important advantage given that many agricultural producers operate on a small scale, are geographically dispersed and continue to face difficulties in directly accessing banking service points.

Instead of having to navigate procedures on their own and travel to branches or transaction offices, customers can receive assistance from lending group leaders in preparing and completing their loan applications within their local communities. Loan disbursement and the collection of principal and interest are conducted periodically at the local level, helping customers save time and travel costs and making it more convenient for them to use the loan proceeds. Based on Agribank’s appraisal, together with the assessment and coordination of lending groups and local authorities, customers may be considered for unsecured loans in accordance with applicable regulations.

With timely access to capital, many households have been able to invest in production, increase their incomes, stabilise their livelihoods and create additional local employment. The lending group model thereby helps reduce reliance on informal credit while improving financial management awareness and borrowers’ sense of responsibility in using loan proceeds. Beyond serving as a lending channel, lending groups operate on the principles of voluntary participation, mutual support and peer monitoring. Members support one another in using capital for its intended purpose, share production experience and provide assistance when difficulties arise due to natural disasters, disease outbreaks or market fluctuations.

The close coordination among the bank, socio-political organisations, local authorities and borrowers contributes to improved credit quality, enabling Agribank to maintain a low non-performing loan ratio for lending through lending groups. Capital provided under this model has become an important catalyst for farms, household farms, cooperatives and linked production models. Many households have been able to restructure crops and livestock, apply scientific and technical advances, improve productivity and gradually develop distinctive local products under the One Commune One Product programme.

Alongside lending groups, Agribank’s extensive network of transaction points and mobile transaction services operated through special-purpose vehicles continues to bring capital and banking services to underserved areas. Agribank currently operates more than 2,200 transaction points and 68 mobile transaction units using special-purpose vehicles nationwide. With total mobilised funds exceeding VND 2.5 quadrillion and total outstanding loans surpassing VND 2 quadrillion, of which lending to agriculture and rural areas accounts for more than 60%, Agribank continues to affirm its role as a key commercial bank in Vietnam’s rural financial market. Maintaining and expanding lending through lending groups not only helps unlock capital for production and business activities, but also contributes to financial inclusion, new-style rural development and efforts to ensure that rural communities are not left behind in the development process.

Kylie Nguyen