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Research Report

Financing household tree plantations in Vietnam: Current programmes and future options

Thomas Sikor
Copyright Date: Jan. 1, 2011
Pages: 40
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Table of Contents

  1. (pp. 1-2)

    Access to external finance critically influences households’ ability to establish and manage commercial tree plantations. This general observation is based on commercial tree plantations operated by smallholders around the world, but it holds particularly true for farm households in Vietnam. In general, many smallholders require external finance when they plant trees, purchase inputs or hire labour for the management of tree plantations. Smallholders also depend on access to external finance if they seek to expand their existing tree plantations by purchasing additional land. The required external finance may originate from various sources, including loans from commercial banks or other lenders,...

  2. (pp. 3-5)

    This section briefly reviews the data used in this report and introduces the 4 study sites.

    The report draws on the results of a simple random survey of households conducted in 4 villages in 2008 (no purposive stratification involved). The questionnaire covered households’ general livelihood situation, including assets, outstanding loans, activities (on-farm, off-farm and non-farm) and livelihood outcomes. It also sought information about households’ tree plantations, including plot histories, management practices and financing. In the 3 larger villages, the survey covered random samples of 20% of all households. In the smallest village (Village 5), the sample included 25% of all...

  3. (pp. 6-10)

    This section reviews the finance requirements for tree plantations and juxtaposes them with household financing practices. It distinguishes 3 production models, which differ in their finance requirements, and identifies 3 types of households according to their financing practices. The use of these typologies is not intended to suggest that actual plantations and households fit the categories neatly. Their sole purpose is to highlight the wide range of production models and financing practices related to household tree plantations in Vietnam; they should therefore be understood as ‘ideal types’.

    The households in the study villages manage tree plantations on short and medium...

  4. (pp. 11-15)

    This section turns to the programmes offering access to external finance. It reviews 5 programmes:

    the Vietnamese government’s ‘661 Programme’;

    the World Bank-funded Forest Sector Development Project (FSDP);

    the Project on Forest Rehabilitation and Sustainable Forest Management (PFRSFM) in Quang Nam, Quang Ngai, Binh Dinh and Phu Yen provinces funded by Kreditanstalt für Wiederaufbau (KfW);

    the Bank for Social Policies (BSP); and

    the Vietnam Bank for Agriculture and Rural Development (Agribank).

    The section briefly summarises each programme’s background and conditions under which it offers access to finance to households.

    The ‘661 Programme’ (also called the ‘5-Million-Hectare-Reforestation Programme’) is the single...

  5. (pp. 16-22)

    This section offers a comparative analysis of the 5 finance mechanisms. The aim here is not to develop an overall evaluation of each programme, but to assess each mechanism against 7 criteria: availability of finance; household access; cost to households; risk to households; leakage of finance to other productive activities; sustainability of financing; and match with finance requirements (see Box 1).

    The programmes vary significantly in their availability. The 661 Programme supports households planting trees nationwide, even though most programme funds go to state agencies and forestry companies. As a result, the programme funds support a relatively small plantation area...

  6. (pp. 23-26)

    This section summarises the assessment of the 5 finance mechanisms covered in this report. It points out critical trade-offs in the design of finance mechanisms for supporting commercial household tree plantations and demonstrates that no single mechanism can match the financing practices of all household types. It concludes with recommendations for a loan-based approach and 3 mechanisms for providing the finance required by different households establishing commercial tree plantations in Vietnam.

    Efforts to design finance mechanisms for household tree plantations encounter 3 critical trade-offs. Perhaps the most important trade-off is between financial sustainability and the goal of providing accessible, affordable...