Banks are being urged to support Vietnam’s quest for sustainability in the rice sector

Vietnam’s quest for sustainability in the rice sector

Thanks to the efforts of the government and banking sector, the rice industry in Vietnam is being given the opportunity to develop a more sustainable model.

In 2023, Vietnam exported rice worth USD4.6bn, up 35% from the year before, ranking it as the world’s fifth producer and third exporter.

This growth was also triggered by India’s ban on the export of non-basmati rice. Now, the Vietnamese government and banking sector are providing framework and financing for a more sustainable approach.

Recent directives

The summer of 2023 marked a turning point for the industry. Rice prices in Vietnam’s Mekong Delta region reached a 10-year high following India's ban on white rice export.

The Ministry of Industry (MIT) subsequently issued a directive in August 2023 calling for the precise monitoring of rice prices, sources and origin to prevent speculation.

In March 2024, Prime Minister Phạm Minh Chính issued Directive No. 10/CT-TTg setting rules for promoting the production, trading, and export of rice sustainably.

Inclusive finance is directly addressed by this directive, which requires the State Bank of Vietnam to direct banks to run credit programmes to support links between cooperatives and businesses for high-quality, low-carbon rice production, processing and consumption in the Mekong Delta region.

HDBank Rural Services

Some banks, such as HDBank, have already anticipated this move. In December 2023, HDBank launched HDBank Rural Services, a specialist financial solution that integrates smart technology with preferential loan programmes for agriculture.

HDBank Rural Services offers farmers loans at 0% interest.

Almost VND5tn (USD202m) will be disbursed by HDBank, starting March 2024, to agricultural services and food conglomerate Lộc Trời Group Joint Stock Company to help expand its value chains in the rice industry, including companies producing fertilisers, processing and exporting rice, distribution agents, and production households.

Phạm Quốc Thanh, general director of HDBank, said these loans are a “green capital source” for the development of agriculture and local areas, as they also promote quality standards in production and business, as well as environmental responsibility, given that farmers must meet the rigorous standards of developed markets.

Reducing gas emissions

The Vietnamese rice industry is also adopting a programme to reduce greenhouse gas emissions.

The "Sustainable development of one million hectares of high-quality, low-carbon rice production associated with green growth in the Mekong Delta by 2030" plan, approved by Prime Minister Chính at the end of 2023, aims to cut gas emissions by over 10%, compared to traditional rice cultivation methods.

By 2030, the added value in the rice value chain is therefore expected to grow by 40%, with profit margins of more than 50% for rice farmers.