DIRECT vs INDIRECT PES: Could Micro-credit be an option?

Le Ngoc Lan, Florence Milan, Chu Thai Hoanh, Tran Duc Toan, Nguyen Duy Phuong

Introduction• Objective:- To find out if microcredit could be an option to use PES

more effectively.• Study site:- Da Bac district, Hoa Binh province- 4 communes in Son La (Chieng Yen, Chieng Ngan, Long

Phieng, Phieng Khoai) as comparative case• Research methods:- Questionnaire, focus group discussion, official interview

1. Problem of direct disbursement (1)

Forest owners which are individual houshold received very small amount of money which contribute absolute nothing to forest management activities. Minimum amount of money that household received was 2,000 VND (1 cent)

Contribution of PES

Frequency PercentValid

PercentCumulative

PercentValid -

9 11.0 11.0 11.0

None52 63.4 63.4 74.4

Less21 25.6 25.6 100.0

Total82 100.0 100.0

1. Problem of direct disbursement (2)

Column1

Total forest area under payment

(ha)

Total money from PES

(,000 VND)Community

forest area (ha)

Total PES for community (,000VND)

Total forest individual

owners

Total PES for individual

owners (,000 VND) Note

Son La province 633786 100000Chieng Co commune 2185.86 480889.2- Chieng Yen village 106.17 23357 106.17 23357 0 0- Hom village 560.35 123277 441 82000.7 119 41276.3Chieng Ngan commune 1327.23 291991

- Pung Luong village 392.28 86302 86302 11

community keep all money from PES for community and for individual household

Long Phieng commune 3614.18 795125

- Mo Tuoi Village

223.13 49089 41650 22 7439Phieng Khoai commune 4186.54 915462- Ta En village 579.59 127509 208.28 63261 77 64248

1. Problem of direct disbursement (3)

• Unclear land allocation from the past caused conflict during payment

Eg: some households claimed that they are the real owner of this forest => official did not know to whom they should pay.

2. Why could micro-credit be an option? (1)

• Two formal organization provide microfinancial services:

- Vietnam bank for Social Policies (VBSP)

- Vietnam bank for Agricultural and Rural Development (VBARD)

2. Why could micro-credit be an option? (2)

Households hardly access to VBARD loans due to:- Distance from village to district transaction office => Transportation cost.- Collateral examination of bank offical usually takes from 2 – 6 months.

2. Why could micro-credit be an option? (3)

2. Why could micro-credit be an option? (4)

• No difficulty in access to VBSP loans.

• However, not all of them were granted 100% amount of loan due to fluctuation of VBSP loans disbursement to commune every year.

=> Increase of demand for loans.

2. Why could micro-credit be an option? (5)

• Community Development Fund:- 4/5 villages used the fund to pay for forest

protection group and invest into infrastructure such as: road, cultural house,etc

- Mo Tuoi village, used the rest to lend to villagers.

2. Why could micro-credit be an option? (6)

“Since you will receive this fund continuously every year, when road and other infrastructures

are already built, what will you use this fund for?”

“Lending to villagers for production” is the most answered.

3. Conditional vs Unconditional lending (1)

• To those who participate in forest management activities, between these two types of loans, what would you prefer?

1. Conditional: You can access to loan with very low interest rate but you have to use the loan for forest production.

2. Unconditional: You can access to loan with higher interest rate than 1st case but the rate is still lower than bank. You can use loan for different purpose.

3. Conditional vs Unconditional lending (2)

Conditional & Unconditional lending

Frequency PercentValid

PercentCumulative Percent

Valid

-15 18.3 18.3 18.3

Conditional20 24.4 24.4 42.7

Unconditional43 52.4 52.4 95.1

Ko vay 2 2.4 2.4 100.0

Total82 100.0 100.0

4. Where to borrow?

• Among these three options, where would you prefer to borrow from?

THANK YOU FOR YOUR ATTENTION!!!