Across the countries, small-scale milk producers have very competitive production costs and thus, if organized, have the potential to compete with large-scale, capital-intensive, high-tech' dairy farming systems in developed and developing countries. With very few exceptions, smallholders achieve relatively high incomes per liter of milk. They are also comparatively resilient to rising feed prices as they usually only use small amounts of purchased feed. Growing consumer demand for dairy products in developing countries, driven by population growth and rising incomes, offers important market opportunities for smallholders. However small-scale dairy farmers are also facing many problems. One of these is hard to access credit, which in turn, reduce the chance to expand the farm scale and cannot exploit the economies of scale. 

Many previous authors studied role of credit access for rural areas, farmers, dairy sectors in the world in general and in Vietnam in particular [1-9]. However, it seems that no author research about factor affecting credit accessibility of small-scale dairy farmers in Gia Lam district, Hanoi city of Vietnam. Therefore, this paper aims to study the factors affecting credit accessibility of small-scale dairy farmers in Gia Lam district, Hanoi city of Vietnam and suggest some policy recommendation to improve the credit accessibility of small-scale farmers.

Selection of the Study Site

Vietnam is a tropical country and dairy farming is not a conventional economic activity because of its unfavorable natural conditions with many natural disasters all-year- round such as flood, drought, storm, etc. In the North of Vietnam, there are some areas that are suitable for dairy farming, include Gia Lam and Ba Vi District (Hanoi city), Moc Chau District (Son La province), Ly Nhan and Duy Tien District (Ha Nam province). Farmers in this area also have a longer experience in dairy farming [10].

In Gia Lam district, by the end of 2020 (the survey time), there were more than 300 dairy farms. Most of them in small scale with average farm size is 7.5 head. This scale seems not increase over time. The explanations for this situation are shortage of labor, limitation in land scale and finance to expand the farming scale. Therefore, this study chooses Gia Lam as a study site.

Data Collection

Primary data was collected by interviewing 81small-scale dairy farmers in Gia Lam district, Hanoi city by standard questionnaire which account for 20% total dairy farm in the region. The information collected includes general information of farmers (age, gender, education...), the production information (number of workers, breeding methods, revenue, transportation methods, distance from household to milk collecting center...) and the information about credit accessibility. 

Data Processing

The collected data were processed by Stata 14 software and presented in table, chart and number to understand the situation of credit accessibility in the region.

Data Analysis

The study applied descriptive statistical methods to describe the status of small-scale dairy farmers and their accessibility to credit. Then, Profit model was used to determine the factors affecting the capacity of farmers to access credit as the following form (Table 1):

Table 1: Variables of the Probit Model

In which,

Y is a dependent variable, indicate credit accessibility of small-scale farmers

Xi are independent variables

Characteristics of small dairy survey farmers in Gia Lam District

Age: Age of the farmer’s owners ranges from 32 to 74 years old. Normally farmers live on their farm from the youth until they are old. There are three fifth farmers aged from 50 to 60 years old. The average age was 51.7 years old. By these ages, they accumulate enough experience and capital for their lives and their farms. They also get good relationship with related people or organizations and know how to access the credit when they are in need. But they are too old to renovate and old age is a constraint for them to update the knowledge and technology in farms (Figure 1).

Figure 1: Age of Farm Owners

Source: Survey data, 2020

Gender

Male farmers dominate numbers of farm owners. Indeed, the proportion of male farmers was 4 times higher than that of female. It is very popular in Vietnam in general and in Gia Lam district that the men normally are the head of household. Nevertheless, the ratio of female was 20% still reflect a positive sign that women gradually have ability to run the business by themselves.

Education

Most dairy farmers in Gia Lam district get secondary and high school educational level, which account for 89%. There is even a small proportion (2.5%) of farmers got primarily school level This situation is normal in agricultural sector in Vietnam. But with low educational level, it is quite difficult for them to update their farm technology and new farming skills. Normally, the higher education level is a favorable condition for them to access the credit as they know how to prepare documents and persuade lenders (Figure 2).

Figure 2: Educational Level of Farm Owners

Source: Survey data, 2020

Working Experience

Most of the farms has the time of working in dairy sector from 11 to 20 years. The average working experience was 16.65 years. Among those farms, the longest time of the farm in this sector was 26 years and the newest was 5 years. Two fifth of the farm has 16 to 20 years of working. High working experience seem to be a favorable factor for them to access the credit because the lenders believe that farmers will know how to operate the farms, easier to get good farm performance and the chance to return the loan will be higher (Figure 3).

Figure 3: Working Experience

Source: Survey data, 2020

Social Participation

In Vietnam, farmers can join some kinds of social organizations, such as Agricultural cooperatives, Women’s Union, Farmers’ Union. People who returned from any army organization could join Veteran Association. The young people could join the Youth Union. Among the survey farms, there were 91.4% farms who participated in the Farmers’ Union; 87.7% of them joined the Women’ Union, 27.3% took part in Agricultural cooperatives and 7.4% was a participant of Youth Union. When dairy farmers take part in any social organization, they normally have higher chance to access the credit because the banks or financial institutions believe that these organizations/unions will ensure the return of loan (Figure 4).

Figure 4. Social Participation of Survey Farmers

Source: Survey data, 2020

Farm Performance

Labor Scale: On average, each small dairy farm in Gia Lam district has 3.27 labors (including family labors) that work in the farm. The maximum numbers of labor working in the farm is 6 people, while the least is only 1 people. Most of the farms have from 2 to 4 labors. The small scale of labor reflects the small scale of farm. This situation, according to the respondents, due to the shortage in labor source. Nowadays, the youth do not want to work in the dairy farms. The farmers’ children will try to join the high education program and work in the city center, they do not want to follow their parents’ job in farms because it is very hard work.

The dairy farmers start to wash the dairy cows and milk them from around 4 A.M, milk delivery to the collecting center, then they return to the farm, work in farms for grass and maize growing, feed the cows, take care and take them treatment... until very late at night, sometimes at 9 or 10 P.M (Figure 5).

Figure 5: Number of workers

 Source: Survey data, 2020

Farm Size

Among these farms, there are only 16% numbers of farm that has from 10 head cows or more, 41% of them has less than 5 dairy cows. The least farm size had only 1 head while the largest size had 25 heads. The average farm size was 6.12 head cows. This small-scale discountenance them to exploit the economy of scale in cow raising. According to the respondents, there are some constraints to the increase the farm size. Beside the shortage of labors, there is a constrain in land. Each farm has less than 1 hectare of land to grow grass, maize for cow raising. It is even very difficult for them to rent the land. In addition, the limitation in finance also discourages them to expand the farm scale (Figure 6).

Figure 6: Farm size

Source: Survey data, 2020

Milk Yield

The milk yield in the survey farms fluctuated over time and from farm to farm. On average, the daily milk yield was 18.9 kilograms (kg) and 5272.22 kg per lactation period of 279 days. The milk yield varies strongly from very low level of only 8 kg of milk per day and 2160 kg per lactation period, to the high of 30 kg per day and 9125kg per lactation period. According to farmers’ response, this distance come from the difference in cow breeds (HF, Cross breed, Local breed), nutrition scheme, working skills and experience of farmers (Figure 7).

Figure 7: Milk Yield

Source: Survey data, 2020

Farm Receipts

Farm receipts varied from farm to farm. The average farm receipts were 269.43 million VND (around 11,817 USD) in 2020. Of those, there was 251.67 million VND came from milk receipts, occupied 93.4% total farm receipts. The rest 17.76 million VND came from non-milk receipts, accounted for 6.4% farm receipts. There were some outstanding farms with a very high receipt. The highest one was 1,400.9 million VND (61,443USD) which was more than 5 times higher than the average survey farm receipts (Figure 8).

Figure 8: Farm Receipts

Source: Survey data, 2020

Credit Accessibility

In Vietnam, to expand the farms’ scale, farmers could rely on their saving or accumulation capital; or they borrow from their friends and relatives; they could get a loan from the banks and financial institutions or credit funds. According to survey results, there was 64.2% dairy farms could access formal credit from banks, financial institutions, or credit funds. Most of this credit came from Vietnam Bank for Social Policies. Besides, the farmers could get the loan from The Bank of Agriculture and Rural Development of Vietnam or the system of People’s Credit Funds that is very popular in rural areas of Vietnam. However, there was still 35.8% farmers could not be able to access credit from these institutions. In case of necessary, they must borrow money from informal financial channels. In some difficult or urgent cases, they could access black credit funds which is very high interest rates and risk, sometimes lead to the dead end for them [11] (Figure 9). 

Figure 9. Credit Accessibility

Source: Survey data, 2020

Factors Affected the Credit Accessibility of Small-Scale Dairy Farmers in Gia Lam District, Ha Noi City

According to the Probit regression results, LR Chi2 = 36.62, Prob >Chi2 = 0.000, showing that the research model has statistical significance, proving the appropriateness of the model in this study. The results showed that among the 6 independent variables included in the model, there are 3 variables that are statistically significant, affecting the ability to access formal credit of small-scale dairy farmers, including: income of household (X3), business scales (X4), social participation (X6).

With the assumption that other factors are constant, the effect of each variable on the ability to access credit of households in Gia Lam district, Hanoi city is explained as follows:

Total farm’s earning (X3) has a negative impact on accessibility from credit that farmers receive (statistical significance). Farms with lower total farm’s earning could easier to borrow money than farms with higher income. Specifically, when the value of collateral decrease by 1, the accessibility from credit that farmers receive increases by 0.0007, provided other factors remain unchanged. This result is in line with initial expectations and is consistent with the previous research results of Barslund M. et al [12]. 

Head cow scales of farmers, calculated by number of dairy cattle of the farms (X4) has a positive impact on credit accessibility that farmers receive (statistical significance). Farmers with a larger farm size can be easier to access the credit from financial organization. This result is in line with initial expectations and is consistent with previous research results [12]. 

Social participation (X6) has an estimated coefficient of 1.309 with a positive sign, showing a positive relationship between social participation and loan amount from official credit institutions (statistical significance). Farmers that participate in local organizations such as the Women's Union, Farmers' Union, Youth Union, etc. will be easier to borrow money from formal credit institutions. When farmers participate in local social organizations, it will help them grasp information about credit faster, especially preferential credit packages. In addition, these farmers will make full use of all relationships to be able to access credit (Table 2).

Table 2: Profit Regression Results

Log likelihood = -43.210893, Number of Obs = 81, IR chi2(6) = 19.25, Prob>chi2 = 0.0038, Pseudo R2 = 0.1821

Survey results showed that to expand production, farmers face some difficulties such as shortage labor sources, land limitation and credit accessibility constraint. Credit institutions normally must screen customers to minimize risks, lead to a reduction of farmers' ability to access formal credit. The estimation from the Probit model showed that there are three factors significantly affected the ability to access formal credit of small-scale farmers in Gia Lam district, Hanoi city of Vietnam: farm receipts, farm size and social participation. 

From that, some suggestions are recommended to improve the credit accessibility of small-scale farmers in Gia Lam district, Hanoi city of Vietnam:

Firstly, small scale dairy farmers had better learn and foster knowledge and experience to enhance their capacity of farm management, increase farm size, farm receipts and in case of necessary, can know how to prepare necessary documents for credits. The farmers could improve their knowledge and skills in many forms such as: Regularly monitoring news related to breeding and grazing extension programs to gain experience and supplement vocational knowledge; regularly pay attention to the credit policies of the State applying for loans to the agricultural sector, find out more information about the lending process and procedures, interest rates, different types of loans, accounts payable, their rights and obligations when borrowing capital.

Secondly, farmers should manage finances and use capital effectively, know how to calculate production costs, allocate costs and use capital appropriately, determine capital needs accordingly to ensure the capacity of credit return.

Third, farmers increase social participation by joining many rural social organizations to enhance the chance of credit accessibility as the lenders could easier to lend their money through the social organization to ensure the return of their capital. The more the farmers participate in groups and organization, the more opportunities for them to access the credit.

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